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Pros And Cons Of Hiring A Family Member As A Trustee

Individuals who possess small- to medium-sized trusts face an important decision: should I designate a family member to serve as the trustee?

Here are pros and cons of selecting a family member to be responsible for managing a trust.

The Pros Of Selecting A Family Member

Familiarity with the beneficiaries. In most cases, the family member knows the beneficiaries, knows the personalities involved and knows family history. The family member as trustee also might possess special insight into what the grantor's objectives are for the trust.

Knowledge of property. A family member might possess special knowledge about homes, land, buildings and other tangible assets.

Lack of expense. Family members typically are not paid a fee, so assets from your trust will not be spent on administrative costs.

Motivation. A family member likely will feel a special responsibility to you and be motivated to execute their duties in a timely manner.

If you do make a relative a trustee, the American Bar Association recommends that you consider naming a successor or successors in case of death, incapacity, divorce or other events. 

The Cons Of Selecting A Family Member 

Lack of financial knowledge. Relatives often lack the financial savvy of a professional trust officer, and the family-member trustee might eventually need to hire professional assistance.

The family member will not live forever. The trust might outlive the trustee. If you hire an institution to serve as trustee, there will always be someone who is in charge of your trust.

Family infighting. Putting a family member in charge of a trust can lead to disputes between family members. 

According to the American Bar Association, a middle ground between naming an institutional trustee and naming a family member is choosing a relative as trustee and hiring a bank or investment company as an independent investment advisor.

Regardless of which way you are leaning, it is very important to seek the counsel of an experienced estate-planning attorney.

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