Factors to consider when selecting a trustee
By Laura Bruce • Bankrate.com

It's easy to focus on assets when writing a trust, but a critical factor to consider is who will be the trustee.

Michael Palermo says doesn't get enough thought -- in fact, he says, many of his clients haven't given it any thought before coming to him.

"People don't make the right choice. They choose one child over the other when there's a sibling rivalry and it's clear none of the children are the appropriate choice," he says. "Or they pick the surviving spouse who isn't the parent. Or it can work the other way around -- the elder child is the trustee and doesn't allow the surviving stepparent the money they should have."

Palermo says sometimes a relative or family friend is named trustee and a bank as co-trustee to manage the money -- a situation that can get touchy.

"Banks don't want to share power -- they don't want to talk to Uncle Ed every time they want to spend money," he says. "A lot of times I'll say the family adviser is just that -- an adviser. The adviser handles the human touch aspect of the job and the bank manages the money. The bank should consider the adviser's input, but not be bound by it."

Make your wishes clear
If you're in a situation where you don't have a trusted relative or friend to act as trustee, Palermo suggests spelling out your wishes in the trust. The less discretion you leave to the trustee in that case, the better.

Palermo puts choosing the right trustee at the top of the list when it comes to estate planning. The wrong choice can haunt your estate years.

"The courts aren't set up for fixing the situation," he explains. "The law weighs heavily in favor of the trustee's discretion. They enjoy great power and are held to a high standard. If they loot a bank account, it's a clear violation where some of these other things aren't."

-- Posted: Aug. 2, 2000