How to help a trustee: Choose, clarify, and simplify

The role of trustee is demanding. It involves assuming powers of administration over assets held in trust for others and a legal obligation to manage them for the purposes specified in the trust document. Trustees typically have responsibility for tax reporting, investment management, and decisions around distribution of assets.

The time, stress, and technical acumen involved in performing these tasks can quickly overwhelm a family member or non-professional trustee. The job will be even more complicated if the trustee is faced with poorly worded trust documents and unnecessarily complex asset structures. These three tips will help streamline the administration of your trust.

1. Choose the trustee that best fits your situation

When choosing a trustee, individuals have two basic options: a family member or other non-professional trustee, or a professional trustee experienced in the intricacies of trust administration. Each choice has its own advantages and challenges.

Those in a grantor’s immediate family, extended family, or inner circle often have a good understanding of the family unit, as well as the grantor’s values and intentions. However, while it’s an honor to be named trustee, serving in this role often creates stress and becomes a burden on family members. Suddenly, they’re tasked with coordinating complex tax returns, managing real estate and other investments, and ensuring distributions are proper. They’re often thrust into the position of balancing the varying interests of family member beneficiaries, and may be perceived as “the bad guy” when carrying out their duties. Add to this the existing responsibilities in life, and it can create an overwhelming burden for non-professional trustees.

While it’s an honor to be named trustee, serving in this role often creates stress and becomes a burden on family members.

Because of this, individuals often consider a common alternative: a professional trustee. A professional trustee can alleviate many of these problems by undertaking the fiduciary role in the trust. Along with providing the skills, resources, and experience to manage complex trusts, there’s a peace of mind knowing a professional trustee will bring objectivity and sound judgment to the administration of trust assets. 

2. Clarify and define trust language

It’s important the trustee has the right tools to support efficient trust administration. This starts with the language in the trust itself.

While it’s common to see trust language define the terms of administration — such as “distributions can be made for health, education, maintenance, and support” — it’s usually prudent to further elaborate on those terms to help guide the trustee when making distributions. For example, “education” could be further limited to “post-secondary education” or “trade school.” This assists the trustee in making decisions and clarifies the grantor’s intent on how the assets should be used. This also empowers beneficiaries to see the language for themselves and understand the types of requests that fit within the terms.

There’s a peace of mind knowing a professional trustee will bring objectivity and sound judgment to the administration of trust assets.

It’s also important to consider how trust provisions may be interpreted over time. Broad terms like “standard of living” could mean many things depending on the stage of the beneficiary’s life. Is the standard set while they were a broke college student, raising kids, or working full time without children?

Undefined and subjective terms create unease for trustees as they strive to ensure compliance with the documents. Vague language such as “hope” or “wish” is not legally enforceable but can at least provide insight into the grantor’s intentions and may help the trustee make decisions.

In appropriate circumstances, grantors can also communicate directly with their ultimate beneficiaries regarding the plan that’s in place. This may help avoid unmet expectations — like assuming an inheritance is distributed outright instead of in trust — and minimize the potential for unrest during administration.

3. Simplify and consolidate trust assets

Having your affairs in order and consolidated in advance will reduce the burden on a trustee faced with gathering and understanding the assets. Many institutions don’t understand trustee authority and working with them can be frustrating.

So, for example, if the grantor has brokerage accounts at three institutions, four bank accounts at another, and multiple credit cards, it could take hours on the phone — and in person — for the trustee to explain their authority and weeks actually to collect, cancel, or update the assets. If, prior to setting up the trust, all the brokerage accounts were consolidated into one, bank accounts reduced to one or two, and credit cards limited to those most frequently used, the difficulty of working through those accounts would drop significantly.

Leaving clear instructions on distribution of personal property is another area where grantors can ease the administrative burden on the trustee. As this is often an emotional part of administration, the certainty and clarity helps both the trustee and beneficiaries.

Following these simple steps can make trust administration less burdensome, save cost, and help preserve family harmony. Plante Moran Trust, N.A. is here to help individuals looking for a corporate trustee or who have been named a trustee and would like a helping hand. To find out more about our services and holistic approach, give us a call.