Picking a trust and choosing a trustee

Trusts -- among the most versatile and flexible financial planning tools -- have become an increasingly common part of asset management, estate conservation and tax strategies. And no matter who you are or what you want the trust to accomplish, you'll be faced with an important decision right off the bat -- whom do you want to act as trustee?

Choosing the appropriate trustee of your trust is driven largely by what the trust is intended to accomplish. Since your decision can have tax and legal consequences it is important that you discuss your choices and the concepts discussed below with your tax and legal advisers.

Your trustee must be of at least the age of majority, but other than that there are few restrictions, and it's even possible to name yourself in many cases. However, if you select a "non-professional" such as a family member or friend to be trustee, it's important they acknowledge the serious fiduciary responsibilities that by law go along with the role.

Even if your trust is uncomplicated, the trustees duties may include the following:

-- Holding trust property and investing the trust assets.

-- Making distributions from the trust to the beneficiaries.

-- Handling tax filings and issues concerning the trust.

-- Keeping records of all trust transactions.

-- If the trust is under a will, making reports to the probate court when necessary.

Sometimes picking a trustee is easy. For example, with a revocable living trust, you generally will choose yourself as trustee so that you may keep control of the trust's assets. With an irrevocable living trust, you'll need to name someone else as trustee to benefit from tax advantages.

Often the choice boils down to selecting between an individual and a state-licensed corporate trustee, such as a bank. Some people hesitate to appoint a corporate trustee because they believe that a friend or relative would be more in tune with their personal preferences. Others may not feel the size of me trust justifies the spending of professional management fees.

Regardless of whom you appoint, be it a corporation, a relative, a fiend or even a personal adviser, you should be confident that your selection has the requisite capabilities and respect for your wishes to make the trust to perform as you'd like.

Here are some considerations related to selecting a trustee:

Consider co-trustees

Many people setting up trusts with a large principal amount prefer to use a corporate trustee, which is governed by state banking authorities. You can do that and still maintain a more personal representation of your wishes by appointing a qualified family member or friend as a co-trustee.

Keep the control that's comfortable for you

As your attorney draws up the trust document, you determine the scope of powers you transfer to a trustee. If you'd like to keep tight control as long as possible, name yourself as the trustee.

Prepare for "what if"

Be sure to choose one or more "successor" trustees who can step in if an individual you've chosen as trustee is unable or unwilling to act. Employees of corporate trustees are bonded, which protects the trust assets against acts of dishonesty. Normally, there is no such coverage with individual trustees. It is possible to bond an individual trustee, but doing so for a friend or a relative is likely to create an awkward personal relationship.

Be qualitative as well as quantitative

You might want to give your trustee more discretion by drafting your trust document so that it reflects your priorities and values, rather than simply percentages and dates. Thus, the trustee could make decisions that encourage a beneficiary to lead a particular lifestyle. Alternatively, the trustee could be empowered to wind down a trust when its purpose has been accomplished, rather than at a preordained termination date that may no longer be appropriate.

Sharon Stanley is a representative of The Prudential Insurance Co. of America in Cape Girardeau (334-2603)