Essential Decisions: Choosing the Right Trustee

Smiling trustee or attorney talking with client in office

During the estate planning process, many people look to their pool of family and friends to choose executors/trustees without understanding the implications of those decisions, or the knowledge that there might be a better option.

We have seen countless situations where a lack of knowledge about trustees has negatively and permanently impacted family harmony. This is when a professional trustee could be a good option. A professional trustee can serve as an objective, neutral party to help alleviate any challenging family dynamics and potential conflicts.

Whether choosing a trusted loved one or hiring a professional, a trustee is an important decision for your client’s future and the futures of their beneficiaries. It’s important to have all the knowledge necessary to make an informed decision.

This summary is designed to help your clients understand the role of a trustee in representing their best interests, maximizing their assets*, and distributing everything according to their wishes.

*Note: CU Trust partners with financial advisors. As a financial advisor, you may continue to manage the assets while CUT serves in a fiduciary role for your client and their beneficiaries.

Knowledge Is Power

Choosing a trustee isn’t as simple as you might imagine. The trustee needs to be qualified, knowledgeable, and committed; their actions will have a lasting impact. When choosing a trustee, there are two avenues to consider:

individual trustee: a man in a baseball cap looking to the side, up into the sunshine, outdoorsIndividual Trustee. An individual trustee is typically a friend or family member. Some individuals choose a relative or friend because it’s a person they can trust and with the mindset that it’s an honor to ask them.

portrait of smiling female professional trustee: Jamiportrait of male professional trustee: JimProfessional Trustee. A professional trustee is a person or institution hired to handle a trust for one or more beneficiaries. Many people don’t realize that there are trustees that have been professionally educated and trained for this role.

The Benefits of a Professional Trustee

When deciding, it’s important to understand the unique benefits that a professional trustee can offer. Consider the following six key decision points:

  1. Neutrality. An individual trustee may know the family’s history and dynamics. However, it may be more difficult for that person to act objectively, without letting emotions affect their actions. This becomes even more challenging, and a potential conflict of interest, when the individual trustee is also a beneficiary, meaning they are making distributions to themselves as well as others. A professional trustee serves as a neutral party and avoids any potential favoritism or subjectivity.

  2. Expertise. An individual trustee may not have any experience managing a trust in general, or with the specific tasks involved (think tax expert, property manager, investment advisor). A professional trustee—with decades of experience and an in-house team of experts—is prepared to handle all aspects of the trust, from the financial details to the perspective and emotional responses of those involved in creating and/or benefitting from the trust.

  3. Consistent Presence. An individual trustee may be busy with their own life and family. They may resign, die, move away, or tire of serving as trustee and neglect the trust and its needs. A professional trustee is there exclusively to ensure ongoing, high-level service.

  4. Checks and Balances. A professional trustee is audited, regulated, bonded, and insured. An individual trustee offers none of those protections.

  5. Regular Communications. A quality professional trustee provides regular communications to keep all beneficiaries informed. An individual trustee may not provide information that is as thorough or as consistent.

  6. Costs and Value. Many people presume that a professional trustee will be expensive. While there are costs for a professional trustee, individual trustees are also allowed to charge for their time. In addition, while the professional trustee has a team of in-house experts, an individual trustee would need to seek out and hire outside services for tasks they can’t manage. A professional trustee ultimately may be a more cost-efficient and effective solution.

Notes to Consider

If you appreciate the value of a professional trustee’s expertise and continuity but still want a family member involved to maintain a personal connection, there is an option to name the bank and the family member as co-trustees. This lets the professional trustee handle the bulk of the financial and administrative tasks, lessening the burden on your family while retaining the family’s insights as decisions are made.

A note of caution: While you may encounter professional individuals offering to serve as your trustee, make sure you do your research. In Michigan, for example, someone only qualifies as a professional trustee if they are a bank with trust powers. All others would serve as an individual trustee—without the protection of regulated audits, insurance, and more.

Making An Informed Decision

Choosing a trustee ranks high on the list of important decisions to be made—like selecting a medical specialist or choosing an investment advisor. An informed decision will ensure that you have the protection and controls that matter the most to you, bringing you peace of mind.

About the Author

Jordan Summers, CEO & President, CU TrustJordan Summers, CEO & President, CU Trust

Jordan Summers joined Credit Union Trust in 2021 as President & CEO. He formerly served as Chief Fiduciary Officer and Market President for a Michigan-based regional bank, handling business development, compliance, and administration.

A licensed attorney, Summers currently serves on the board of the MBA Trust Executive and Trust Counsel Committees. He also serves on the board of the Midland Business Alliance and the Chippewa Nature Center. He received his BBA from Northwood University, his MBA from the DeVos Graduate School at Northwood University, and his JD from Wayne State University.