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September 18, 2017 Ask ACE

Should a family member serve as trustee of a trust?

Q. Should a family member serve as trustee of a trust?

ACE Advises: Sometimes a family member is appointed trustee in a living trust document or under a will to administer a trust for a grantor and/or other beneficiaries.

The trustee family member may also be a beneficiary of the trust, which can present a conflict of interest in making trustee decisions.

There are many matters to consider when serving as trustee. For example, trusts must be administered in compliance with the trust terms and all laws and regulations. Trustees have a legal duty of loyalty to the trust and must be objective.

Trustees' decisions during trust administration can have serious fiduciary tax consequences or can have an adverse impact on beneficiaries' ability to participate in financial programs that are critical to their care.

Also, it can be hard to keep one's personal feelings in check when making decisions as trustee. A trustee may be faced with difficult situations that affect the trustee who is also a beneficiary differently from other family members.

Those are among reasons why in most instances it is important to have a qualified and experienced objective third-party co-trustee serve with the family member trustee.

The co-trustee can be a trust company, an attorney a CPA or some other credentialed, qualified individual who has the appropriate education and experience to help the family member trustee administer the trust accurately and efficiently.

The cost of enlisting the assistance of a qualified partner can be justified by the help it provides in avoiding greater costs to the trust down the road.

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