One of the most important choices you’ll make when you establish a trust is selecting the right trustee. The trustee oversees the trust assets, which are typically worth millions. The decisions your trustee makes, along with the trust documents you sign, will largely determine how well your trust fulfills its purpose.

Parents might be inclined to name their adult child as trustee, but question whether it’s the right call. Are they mature enough to handle fiduciary responsibilities?

There isn’t a one-size-fits-all answer to the question of whom to choose, and that’s why it can be such a difficult decision. Here are seven traits to look for in a prospective trustee.

1. A Sophisticated, Modern Mindset
2. An Understanding of a Trustee’s Duties
3. A Well-Suited Approach to the Family’s Needs
4. A Focus on Managing the Process
5. A Commitment to the Next Generation
6. A Big-Picture Perspective on the Trust’s Purpose 7. The Right Relationship with the Family

Let’s discuss each trait in more detail.

1. A Sophisticated, Modern Mindset

Serving as a trustee is about so much more than administering the trust, making distributions, and managing investments. To be truly

effective, a trustee must be aware of the political climate as it relates to changing trust taxation laws that could affect the beneficiaries.

The trustee should also understand the complexities of trust situs. The laws of the state where a trust is set up affect how well the trust protects assets from creditors and how trust distributions are taxed. For example, the trustee needs to understand the possible implications of your beneficiary daughter moving to a state that has higher income taxes than the state from which she is moving to and, ideally, discuss those issues with her beforehand.

2. An Understanding of a Trustee’s Duties

The trustee you select must act as a fiduciary and fulfill these three key duties:

  • Loyalty: Act in the best interests of the trust and its beneficiaries.
  • Impartiality: Not make decisions that favor the interests of one beneficiary over another.
  • Prudence: Exercise care, diligence, and caution in administering the trust.

Understanding these duties can help you shorten your list of trustee candidates. Certain family members might not be detail oriented enough to fulfill the duty of prudence. A business associate may struggle to be impartial if the business’s best interests conflict with those of the trust.

3. An Approach Well Suited to the Family’s Needs

As the grantor, you know the first generation of your trust’s beneficiaries, and maybe the second generation. You are likely familiar with their strengths and weaknesses when it comes to life choices and financial decisions.

To view all seven traits to look for in a prospective trustee, click below to view the PDF document in full.