Choosing a trustee to manage a Colorado trust after someone has died may seem like a simple decision; however, much thought should be put into it. From keeping a detailed record of trust account activity to reporting the income tax liability of the trust, performing the duties associated with being a trustee can often be both overwhelming and immensely important. While the first instinct might be to pick a friend or family member to serve as trustee for the estate, there are compelling reasons why a professional trustee should be chosen instead.
Managing an estate can often be very technical and time-consuming. Because of this, there are factors to take into account when selecting a trustee:
It may seem logical that having a family member serve as a trustee would be cheaper than hiring a professional; however, this is not often the case. Individual trustees, unlike fiduciary institutions, must hire other professionals like attorneys and CPAs to help them perform estate-related duties. These costs are often unexpected and not included when calculating the overall cost of a trustee. On the other hand, corporate trustees often provide these services in house and are bundled into a comprehensive fee.
Additionally, inexperienced trustees will often forget that the residence of a trustee determines the income taxation of a trust and its relevant state law. On the other hand, professional trustees may also have an office in a state that will avoid state income tax on the estate.
Oversight of Assets
Because funds can be mismanaged, whether accidentally or purposefully, it is important to consider whether the trustee and his conduct will be subject to examination. Trusts handled by individuals have very little oversight, meaning misconduct is less likely to be caught. However, professional trustees are often audited by internal bank auditors and government regulators to ensure compliance with relevant law. This safeguard is critical to make sure assets and property is distributed according to the person’s wishes.
Ability to Make Tough Decisions
Trustees are often required to make hard choices, such as withholding assets from a troubled beneficiary. When the trustee is either a family member or close friend, they may be unable to make impartial decisions and say “no” when necessary. On the other hand, a professional fiduciary is impartial and will manage the trust according to its terms and applicable law. Professional trustees are experienced in making difficult decisions and will do what is in the best interest of the estate, not the personal wishes of others.
Managing an estate plan can often be very technical and time-consuming, so it is critical to select the proper trustee. An experienced estate attorney may be able to help with this process and ensure assets are properly handled.
Contact a Boulder Estate Planning Attorney for Immediate Assistance
If you do not yet have a Colorado estate plan, or are in the process of putting one together, contact the dedicated attorneys at the Braverman Law Group. We have extensive experience assisting clients of all backgrounds and of varying net worth create comprehensive estate plans. The trust administration process is crucial, and we can help you make the important decisions that ensure your estate plan is effective. To learn more, and to schedule a free consultation to speak with an attorney today, call 303-800-1588