Choosing a Trustee
It’s time to broaden our knowledge on trusts!
We've been talking a lot lately about the whole concept of trust, one of the big words of estate planning. (Want a full-on review? Click here!)
Basically, what we already know is that trust has something to do with entrusting the properties of one person to another. People choose to do this for its benefits—it allows the property owner a higher degree of control over her estate, saves money by avoiding probate proceedings, and also saves time and effort in transferring the properties to the property owner’s beneficiaries.
We know, too, that this whole affair involves three parties:
The trustor - the property owner (also known as a grantor or trustmaker),
The beneficiaries - the property owner’s loved ones who are to receive the properties, and
The trustee - the person to whom the properties are to be entrusted and who manages the properties in the meantime
In today’s post, let’s put the spotlight on this third one--Who exactly is a trustee? What are their responsibilities? How do I choose and appoint my trustee?
I’ll answer all these one by one!
Who is a trustee?
As I have already introduced above, the trustee is the person whom the assets of the owner (who, again, is referred to as the trustor in this relationship) are to be entrusted with. She is responsible for the administration of the properties of the owner, up until they are distributed to the property owner’s beneficiaries. In other words, if you are to assign a trustee, you are designating the person who will take on the responsibility of holding and managing your properties, and, eventually, passing them on to your beneficiaries.
Seems like this whole trustee thing is no simple job, huh? It’s not! This is exactly why, above all, you need to assign someone who you know is loyal, responsible, and, of course, trustworthy.
Save for the age requirement, the trustee can be just about anyone. She can be a beneficiary herself, a family member, or a lawyer or any hired professional. In fact, the trustee can even be a firm or corporation—a trust company! The law does not set strict rules in choosing a trustee because, again, what matters most is the loyalty and trustworthiness of the person with respect to the property owner. In trusts, you, the owner, are the boss.
What does a trustee do?
At this point, I’m sure you already have a good understanding of the responsibilities of a trustee. But I am sure, too, that ‘taking care of the properties’ still sounds a little too vague for some, so here are some specific tasks a person is expected to do while playing the role of a trustee —
Know the property. This is very important especially if the trustor has a lot of properties under the trust. Surely, a trustee will not be able to properly take care of these assets if, in the first place, she has no idea what, where, and in what condition the properties are. Details are important, and these details, most certainly, a trustee is expected to know.
Keep an inventory. This is for the benefit not just of the estate and the beneficiaries of the property owner, but it also helps the trustee herself. An inventory serves as a guide to all the interested parties as to which properties have already been passed on to the appropriate beneficiaries, those which have already been sold (yes, the trustee may be given the power to sell!), and those which are still in the possession of the trustee.
Protect the property. This, essentially, is the major responsibility of a trustee. In this set-up, she must take measures to prevent any act that would tend to cause injury to the properties in trust or to the interest of the beneficiaries themselves. Remember, the whole point of a trust is to preserve the trustor’s properties in favor of her loved ones, so yup—this task is definitely a given!
Practice impartiality. At times, conflicts arise among beneficiaries resulting from their desire to get a bigger share or to acquire specific properties or valuables from the estate. In times like these, impartiality is key! A trustee should not be easily swayed and should remain fair among all of the beneficiaries of the property owner.
Convert some property. When we talk about ‘estate’ or ‘assets,’ we immediately think of land, houses, and such other similar properties. We must remember, though, that these immovable properties are just one type of property that a trustor may own. She may also have perishable or consumable goods such as crops, livestock, among others. In cases where the estate consists of goods subject to deterioration, it is the duty of the trustee to convert these to cash proceeds, which, again, is all for the good of the beneficiaries.
Who should I pick as my trustee?
I do not want to sound redundant, but really, all that you need for a trustee is one who is loyal to you and your wishes, extremely reliable in handling cherished properties you worked so hard for, and one who has no desire for any personal gain—a trusty trustee!
Once you have already decided on your trustee, her name and responsibilities, details of your properties, as well as your clear intention of entrusting them to a third person should be embodied in what we call a trust agreement. We can talk more about this in a separate post (I don’t want to bombard you with so much new information!), but basically, it’s just a legal document containing the terms of the trust.
And that’s that on the topic of trustees! You may have some more questions on the matter, or you may actually already want to start drafting your trust agreement--whatever it is, I’m here for it!
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‘Til the next blog, guys!