Wednesday, June 10, 2015
When setting up a trust for a loved one people often instinctively want to select a family member to serve as trustee. There are three reasons why appointing a family member as a trustee is a mistake:
- The role of trustee requires a time commitment. The responsibility of being a trustee involves major fiduciary responsibilities that will require an extensive time commitment. Trustees have a whole host of responsibilities that a person might want to avoid placing on the shoulders of a family member.
- Trustees can be held personally liable for breaching fiduciary responsibilities. A grantor setting up a trust might want to think twice about appointing a family member into a position that could open them up to personal liability.
- Appointing a family member as trustee could increase the risk of family conflict. Beneficiaries and Trustee’s often have major disagreements over the way a trust might be managed. If a grantor appoints a family member to serve as trustee then a potential dispute involving that trust would become a family dispute.
See David H. Lenok, Three Reasons to Choose a Non-Family Trustee, Wealth Management, June 9, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.