Choosing a Trustee: Individual vs. Professional for Families Over 50

Why Trustee Choice Matters

When planning a trust, selecting the right trustee is one of the most consequential decisions a family can make. The choice typically comes down to an individual—often a relative or close friend—or a professional trustee such as a trust company. Each option brings distinct trade-offs in areas like cost, expertise, continuity, and potential conflicts of interest.

Key Differences Between Individual and Professional Trustees

• Fees: Individual trustees, such as family members, generally charge little or nothing, whereas professional trustees charge market-based fees that can be substantial over the life of the trust.
• Expertise: Professional trustees bring specialized knowledge in trust administration, tax, and investment management, while individual trustees may lack this experience unless trained in finance or law.
• Continuity: Professional trustees are institutional and can continue administering the trust regardless of the individual's health or passing, whereas an individual trustee’s death or incapacity may disrupt trust management.
• Conflicts of Interest: An individual trustee (particularly a family member) may face divided loyalties among beneficiaries or personal interests; professional trustees have fiduciary duties and internal policies to manage conflicts, though they also have commercial incentives that could conflict.
• Regulation: Professional trustees are typically regulated and insured, offering an additional layer of accountability that individuals do not provide.

Decision Framework for 50+ Families

When comparing trustees, families over 50 should assess their own circumstances against the following considerations:

• Complexity of assets: If the trust holds real estate, operating businesses, or significant investments, professional expertise becomes more valuable.
• Family harmony: If there is potential for disagreement among beneficiaries, a neutral professional trustee might reduce friction, whereas a family member could exacerbate it.
• Long-term horizon: For trusts meant to last decades, the continuity of a professional institution may be preferable to relying on an individual who could become unable to serve.
• Cost tolerance: Families with modest trust assets may find professional fees burdensome, making an individual trustee more practical, but they must accept lower expertise and continuity risks.

Common Misconceptions to Avoid

• Assuming a family trustee is always cheaper: While they may not charge a fee, the costs of their lack of expertise—such as mistakes in tax filings or poorly managed investments—can outweigh professional fees.
• Believing professional trustees are conflict-free: They have their own commercial interests and may also face conflicts; the key is understanding how they manage them.
• Overlooking backup plans: Whether you choose an individual or a professional, having a successor trustee arrangement is essential to ensure continuity.

Questions to Ask Before Deciding

The following questions can guide your evaluation of any trustee candidate:

• What experience do they have with trusts of a similar size and complexity?
• How do they handle investment decisions and reporting?
• What is their fee structure, and are there any hidden costs?
• How do they manage conflicts of interest?
• Who will take over if the trustee becomes unavailable?

By weighing these factors against your family’s unique situation, you can make a more informed choice between an individual and a professional trustee.