Category: Will & Estate Planning

Whom Should you Appoint as Trustee of a Trust

A trust is a relationship whereby property is held by one party on behalf of or for the benefit of another. A trust is created by a settler, who transfers property to a trustee. The trustee holds that property for the trust’s beneficiaries.

Here are some benefits and objectives of using trusts:

Avoiding taxes: An estate tax is a tax on a person’s right to transfer property after death . A trust helps to avoid or reduce estate taxes because assets and property placed into a trust are not subject to these taxes.

Avoiding probate: By keeping certain property out of probate estate, one can avoid many of the hassles, costs, and lack of privacy concerns related to probate.

Protecting estate (and beneficiary’s or beneficiaries’ estate) One of the primary uses of trusts is to protect the property even after it becomes someone else’s estate.

One can use a trust to hand over the money to a successor when he/she is capable enough to handle it in parts/full. The trust can give the successor a little bit each year for some duration, and then a final lump sum at some age when the successor is  capable enough to protect the money as if the person had actually earned it himself/herself.

One can add conditions to how the money in the trust is dispersed, too.

Provision of funds for educational purposes: Trusts can make money available for children, grandchildren, relatives, or even nonrelatives for educational purposes.

Benefiting charities and institutions: A charitable trust is a popular way to donate to charitable organizations. A grantor can transfer assets such as money, real estate or art to a charitable trust, and designate that they eventually be given to a specific organization. In the meantime, however, the grantor can continue to use the property. These kinds of charitable donations are often tax-deductible

Should you serve as a trustee?

One need not accept the job of a trustee, if asked to serve as one. Here are some questions one  may need to consider before taking a decision to act as a trustee or not. It’s usually a good idea to take a little time to consider the options before one agree to take on a job that can entail a great deal of responsibility and last for months.

What One is getting Getting Into?

A successor trustee is in charge of wrapping up a deceased person’s financial affairs. The trustee gathers trust property, keeps it safe, and eventually distributes it to the beneficiaries named in the trust document .The trustee may also need to file tax returns, pay creditors, and get assets appraised.

The above may take a lot of time with all the paperwork, phone calls, emails, and calls to lawyers. If one is short of time it is a good idea not to take up this job.

On the other hand, wrapping up a simple living trust shouldn’t take too long, and one can get help from tax experts, lawyers, and others.

Conflict among beneficiaries

If there is conflict among the trust beneficiaries, it is better to think twice before saying yes.

Also one should consider the relationship with the beneficiaries and with the executor of the estate. If the relationship with certain beneficiaries is extremely difficult one it is better not to take up this job.


Having more than one trustee generally complicates matters because both must agree on every action taken on behalf of the trust.

Condition of the Records

The difficulty of a trustee’s job will depend mostly on how organized the financial and legal matters of the deceased person were.

Willingness of the person appointed as Trustee

Most people, again, don’t really want to serve as a trustee. Accepting the position adds a obligation to the already busy lives and forces one into a world of legal, financial, and tax matters. A trustee must be fully honest and avoid anything that even looks like unfairness.

When one cannot trust the trustee

Establishing a trust fund with a family member as trustee is a common practice, but it works out best when the trustee doesn’t mishandle the money.

Trustworthy relatives make great trustees when the beneficiaries are also in the family. They usually don’t deduct trustee’s fees from the fund, and their personal interest in the trust should be enough of an incentive for them to invest and manage the assets wisely. But this may not always be the case.

The most reliable trustee option is not a person , but rather a bank or another financial institution.

Another way to avoid trustee misappropriation is to appoint a trust protector. A trust protector does not bear the same responsibilities as a trustee, but inspects the records of the trust time to time to make sure that it’s being managed properly. Depending on the powers granted to the protector in the trust, this person may have the authority to override trustee decisions or even appoint replacement trustees.

Can you be the trustee and beneficiary?/Can you be the trustee of your own trust?

In a revocable living trust one sets up for oneself, very frequently the person will be the trustee and the beneficiary during the lifetime, or at least until he/she become incapacitated and the successor trustee must take over. At that time, the person will still be the beneficiary, but the successor trustee will be managing the trust assets for the benefit of the beneficiary.

Can you be the trustee of an irrevocable trust?

An irrevocable trust is one that generally cannot be modified. An irrevocable trust could be a trust that became irrevocable upon the death of the person who created the trust or could have been created as an irrevocable trust from its inception.

One common tax-saving trusts is an irrevocable life insurance trust.

An  irrevocable life insurance trust shelters life insurance death benefit proceeds from estate taxes. After setting up the trust, one still has life insurance, and the beneficiary or beneficiaries still receive the proceeds from the policy upon the persons death and estate taxes will not be a problem  too.

Costs and risks of setting up a family trusts

Costs of trusts

A family trust can be costly, complex and take time to manage.

One also needs to think carefully about who will be the trustees, as they will be responsible for managing the trust properly. The will should nominate people to be trustees after one dies.

Risks of trusts

If a trust is not set up or managed well, there can be considerable inconvenience and cost.

One runs the risk of having the trust declared a ‘sham’, which would mean that the assets are not really the trust’s but are in fact still the persons. This may lead to penalty as well.

Once assets are put into a trust ownership passes to the appointed trustees who must act under the terms of the trust deed in the best interests of the beneficiaries.

Forming a trust is a big decision. It should be established properly, for the right reasons, and managed well.

Tips on setting up a trust

  • Hiring An Attorney
  • Interviewing potential attorneys
  • Choosing the right lawyer.
  • Choose between a living trust or a testamentary trust
  • Choose between a revocable and irrevocable trust.
  • Catalog the assets
  • Select the trustees
  • Name the beneficiaries
  • Create the trust
  • Look into professional trust management firms.
  • Issue deeds for your real estate
  • Open or rename your financial accounts
  • Assign your personal property to your trust

What should I consider while appointing trustees and executor for my trust?

An Executor is the individual or entity named in a Will to oversee the administration of assets passing under the Will.

A Trustee, on the other hand, is the individual or entity named in a Trust to oversee the administration of assets held in the name of the Trust.

Any candidate for Executor/Trustee is usually also a good choice for Trustee, and vice versa.

A good Trustee should possess the below characteristics.

  • be knowledgeable about what a Trustee is and does.
  • be trustworthy,reasonable, well-organized, and responsible, and must possess good listening skills.
  • have either direct experience with investments, tax laws, legal issues and accounting, or have access to those professionals who provide such expertise.
  • must be able to get along with the beneficiaries of the Trust and work effectively with them.


Debalina Roy Chowdhury

Content Writer – Dilzer Consultants



18 March 2016