Its been decided – you need to establish a Trust. Perhaps you have a blended family and want to reduce the risks of your Will being challenged following your death. Perhaps you have a disabled or spendthrift beneficiary who needs assistance to maintain financial stability. Perhaps you have minor children who could not manage funds personally in the event of your untimely death. There are countless reasons a Trust may be advised.
Now, though, the difficult question of choosing a Trustee must be addressed.
There are traditionally three categories of people chosen to act as trustees:
- Family Members and Friends.
- Professionals (Lawyers, Accountants, Financial Planners).
- Trust Companies.
Family and Friends
People who know you offer the advantage of understanding your values and the personal goals behind your decision to establish the trust. Of course anyone chosen should be financially responsible, trustworthy, organized and capable of working with legal and tax matters. But what other considerations should be taken into account?
Age – Our most trusted personal advisors are often our age, meaning they are more likely to be incapable of acting or even deceased at the time of our own death; young appointees may lack the requisite skills and experience necessary to administer your trust.
Nature of Assets – if your trust or estate contains only liquid assets to be managed and distributed in a specified manner, your selection of potential trustees may be much broader than if your assets include a going concern business that must be operated within a trust for a period of time. Land, foreign holdings, corporate shares, animals and other assets each raise different considerations.
Residency – the Estate Administration Act permits individuals residing outside British Columbia to act as your executor and trustee, but it does not assist in resolving practical challenges created by a distance from the physical assets to be managed. There is also provision in the Act for the Court to grant a special administration to another party, if absence is delaying administration of your estate. Tax legislation in other countries can impact the feasibility of your choice as well – US citizens and Green Card holders are often advised by tax professionals not to act as trustees outside the United States.
Professionals offer expertise in the specific tasks trustees must take on and, depending upon their profession, may also be bound by professional licensing standards that increase their clients’ peace of mind when entrusting assets to their care. Professionals often agree to take on the role of trustee or executor for clients they have had prior dealings and built significant rapport with, increasing their understanding of the personal objectives giving rise to the trust.
Trust companies offer the knowledge and expertise of professionals in an even more heavily regulated environment. While the employees of the trust company may never have met you personally, there is a heightened degree of continuity and objectivity in selecting a company rather than an individual, as complex family relationships will not have any impact upon the company’s method of administration.
Due to the benefits and limitations of each of these three categories, you may consider opting for a personal advisor and a professional or corporate advisor to act jointly. In this case, it is common for the professional or trust company to be allocated tasks associated with legal and tax matters, records keeping and providing/obtaining necessary opinions, while your personal advisor will guide specific allocations and distributions to your beneficiaries.
Establishing a trust, either during our lifetimes or in our estates, is quite common and the need for them or their benefits are not restricted to the wealthy. Successful implementation of a trust is often a reflection of the care taken in selecting trustees. If you have questions about whether a trust is suitable for you, or about selecting an appropriate trustee, please contact our offices to obtain advice on these matters.