Naming a trustee is one of the most important decisions you will make when creating a revocable living trust. The trustee you select will manage every asset owned by that trust, make financial decisions on behalf of your beneficiaries, and carry the legal obligation to follow your instructions precisely. If your choice of Trustee is not optimal, then the trust you spent time and money building could become a source of family conflict, financial mismanagement, or costly litigation.
Most people instinctively choose a family member or close friend as their successor trustee. Others consider handing the responsibility to a corporate trustee, such as a bank or trust company. Each option carries distinct advantages and serious risks, and the right choice may depend on the complexity of your estate, your family dynamics and the options you have available, the cost, and the level of professional oversight or expertise your plan requires.
Choosing an Individual Trustee for a Living Trust
An individual trustee is typically a spouse, adult child, sibling, or trusted friend. The appeal is straightforward: this person knows your family, understands your values, and may even serve without charging a fee (although the vast majority of trustees are compensated). For smaller, uncomplicated estates, an individual trustee can be an efficient choice.
However, knowing how to choose a successor trustee should go beyond picking someone you trust personally. An individual trustee must also be able to understand fiduciary duties, tax reporting obligations, investment management principles, and state-specific laws governing trust administration. Alternatively, this person must be able to hire an attorney, accountant, and financial planner to assist them as needed, especially if they don’t have all of the above knowledge.
Most people, no matter how well-intentioned, have no training in any of these areas. A single misstep, such as failing to file a required tax return, making an imprudent investment, or distributing assets in a way that conflicts with the trust terms, could expose the trustee to personal liability and cause lasting damage to beneficiaries. For these reasons, it is strongly suggested that individual trustees act under the advice and counsel of an estate or trust attorney when carrying out their duties.
Family dynamics add another layer of risk. When one child is named trustee over siblings, resentment and suspicion may sometimes follow. Accusations of favoritism, mismanagement, or self-dealing can fracture families and lead to expensive legal disputes.
Why Choose a Corporate (Professional) Trustee
A corporate trustee (or “professional trustee”) is usually a financial institution — often a bank, trust company, or financial services firm — that administers trusts, often as its core business. A professional trustee also could be an attorney, CPA, or other financial professional. When comparing a professional trustee vs. an individual trustee, the professional option offers several distinct advantages.
Professional management means your trust assets are overseen by licensed fiduciaries with a high level of expertise in tax compliance, investment strategy, and regulatory requirements. Professional trustees maintain continuity; they won’t become incapacitated, move out of state, or pass away unexpectedly. If a specific trust officer or bank employee becomes unable to serve, there are other members of the team that can step in, which can provide flexibility and continuous service. They also bring professional impartiality — because they are not a member of the family or involved personally in the situation — which is invaluable when beneficiaries have competing interests or when distribution decisions require unbiased discretion.
The tradeoff is cost. Corporate trustees charge annual fees, typically calculated as a percentage of trust assets. They may also lack the personal familiarity with your family that an individual trustee would have. For estates below a certain value threshold, these fees may not be cost effective and could adversely affect the overall value of the trust.
What are Some Pitfalls When Choosing a Successor Trustee?
The consequences of choosing the wrong trustee can be many. Individual trustees who lack financial sophistication may not understand some of the assets in the trust or the concept of funding the trust, could mishandle required accounting, or unknowingly breach their fiduciary duties. This is why the advice and counsel of an attorney is always recommended — because if the trustee does not have these levels of expertise, they can simply hire someone to help them that does have expertise. Any such mistakes can almost always be avoided with the right advice and guidance. If not, such mistakes can result in personal liability for the trustee, depleted trust assets, and beneficiaries who are unhappy or taken advantage of.
On the other side, selecting a corporate trustee without understanding the fee structure or service limitations can lead to frustration and unnecessary expense. Some corporate trustees impose minimum asset requirements, restrict investment choices, or apply rigid distribution policies that conflict with the intentions of the trust creator (grantor).
This is precisely why choosing a successor trustee requires great care and consideration — it demands a careful legal analysis of the estate assets, the terms of the trust, family circumstances, and the duties the trustee will need to perform. An experienced estate planning attorney can evaluate whether an individual trustee, a corporate trustee, or a combination of both is the right fit for your plan. In some cases, naming co-trustees or structuring a trust with professional oversight could provide the best of both worlds.
Questions to Consider When Selecting Your Trustee
When deciding who you would like to select as your Successor Trustee, and whether an individual trustee or professional trustee makes more sense in your case, there are several questions that you should consider:
What is the size of your estate? The larger your estate, the more likely you may want a professional trustee.
How complicated are your assets? How complicated are the terms of your trust? Again, the more complication, the more likely a professional trustee will be suited for the job.
What options do you have for individual trustee? Some clients have lots of options — various family members and friends that they would feel comfortable with asking to serve as trustee. However, sometimes clients have very few people they would trust to serve in this role, or none. In these cases, a professional trustee may make sense.
What will your individual trustee charge? Individual trustees are usually compensated and do not work for free. There is no set requirement on what you must pay an individual trustee. Your attorney can give you guidance on these issues.
What options do you have for a professional trustee? Have you looked at various options in your area? How many professional trustee options are there? What are the differences between them? What types of trusts do they specialize in? What kinds of clients do they cater to?
What does the professional trustee charge? Many will charge a percentage, per year of service. Some professional trustees have minimum estate sizes, or minimum yearly charges. Always make sure you know what a trustee will charge for their services.
Talk to Your Estate Planning Attorney About Choosing a Successor Trustee
Choosing between an individual and corporate trustee is not a decision to make casually or based on general advice alone. The wrong selection can expose your estate to mismanagement, family disputes, and legal liability that undermine everything your living trust was designed to accomplish. The attorneys at Piatchek Law Firm in Springfield, MO work closely with clients throughout Missouri to structure trusts with the right trustee provisions, ensuring your assets are protected and your wishes are honored. Contact us today to schedule a consultation so that we may answer any questions you have about trusts or trustees, and get started on your estate plan.
