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How important is choosing the right trustee?

Over the past month or two, we've talked a lot about trusts and other estate issues. We recently discussed how important it is to ensure your estate documents convey your wishes, but when you're gone, how to do you ensure those wishes are actually carried out? While the law provides some assurance for that, you can increase the chances your legacy is honored by selecting the right trustees. But what, exactly, is a trustee?

A trustee is someone you appoint to administer assets, usually in relation to a trust that you set up for that purpose. When a trustee accepts the position, he or she enters into a fiduciary agreement with the trust and the beneficiaries. This means he or she is legally bound to act with the best interests of the beneficiaries and the trust in mind.

Legally bound doesn't always mean trustees act with those interests in mind, however. While the law provides for the removal of a trustee who doesn't follow the rules or acts inappropriately, removal does require filing and proof -- a burden you probably don't wish on your heirs. By choosing a trustee you know well and trust, you can reduce the chance that this will happen.

In most cases, a trustee is a third-party that does not benefit from the actual trust itself. In some cases, you can create a trust that would benefit the trustee, as you might do if you are leaving assets to an adult heir or you are creating a trust to use yourself for tax or shelter purposes.

Choosing a trustee is only part of the estate planning process. Estate plans, and all the documents that go with them, can be complex. This is especially true if you choose to incorporate trusts into the mix. Working with someone with experience in such matters can help you avoid mistakes that could cause headaches for future trustees and heirs.

Source: Investopedia, "Trustee," accessed Oct. 09, 2015

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