The Trustee. There are four alternatives trustees that can be utilized in establishing a trust:

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1 The Trustee The following is a discussion of the use and type of various trustees. It covers many significant topics that a trustor (the one establishing the trust) should consider, but it is imperative on an individual to personally interview several potential trust companies and trustees to insure that the selection addresses not only competency, but someone who the trustor feel comfortable with and who believes will understand and will carry out the trustor's needs and desires. Do NOT trust any entity with money unless there has been a complete investigation of the firm and individuals that will handle the assets. There are two types of trustees- corporate and individual. Both have their place depending on the size of the trust, skills required and a host of other issues. If picked correctly, it should put one's mind at ease. By the same token, irresponsible selection of trustees by trustors has led to reckless and incompetent behavior, lost funds and a breach of fiduciary responsibility. Selection of Trustees: As stated elsewhere, a trust is established for a variety of reasons. Outside of the possible tax advantages and the opportunity to avoid probate, the trust is primarily a management vehicle that allows a trustor to release control of assets to a trustee when 1) they no longer want to manage due to other pressures, 2) when they are incapacitated or 3) upon the trustor's demise. There are four alternatives trustees that can be utilized in establishing a trust: 1. The surviving spouse or children 2. A corporate (institutional) trustee such as a bank or trust organization 3. An unrelated person 4. A combination of all three The selection process depends on 1) the personal desires of the individuals establishing the trust, 2) the confidence level of the trustor in the ability of the individual trustees as compared to an institution, 3) the ages of the trustors and 4) the personal reasons of the trustors. Universally, it is the emotional reasons that determine who will control the assets. Unfortunately, it is also that same reasoning that causes many trusts to end up with incompetent trustees. Picking a trusted friend to baby-sit your children is one thing- picking that same individual to manage several hundred thousands of dollars of assets over a period of time is an entirely different matter.

2 Individual Trustee: Individuals are very often chosen since they are relatives or friends of the grantor. But as stated above, the primary selection of these trustees is apt to be solely on an emotional level- not on capabilities. And it is for that reason that many trusts have poor performance. But if a trustee is selected on the basis of education and financial acumen as well, several benefits are available which are discussed below. 1. Individuals, particularly spouses and children, may not charge trustees fees (meaning they COULD, but opt not to) and hence considerable monies can be saved versus corporate entities. However, this can cause more problems than it solves. If one child serving as trustee has to spend untold hours on the workings of the trust, he/she may feel that the other children are getting a free ride- in most cases a true statement. The trustee may feel emotionally obligated (and burdened) to carry out the duties since it was the desires of the deceased, but hard feelings may ultimately emerge. How well will these desires be accomplished under these circumstances? Perhaps poorly. And in too many instances, it can lead to bickering and bitterness in the family. While the other children may feel the trustee is merely fulfilling a family obligation, some (perhaps most) of their concern is simple greed. Obviously this is not an easy situation, but the following may put the situation in focus: "You get what you pay for." I submit that quality work should be compensated. The trustor (the parent in most cases) should tell the non-trustee children, PRIOR TO THE TIME THE TRUST IS PREPARED, that so and so will be acting as trustee because of his/her financial background and that "x" dollars will be charged by the trustee and that it is fair. That should take most of the edge off the problem. But since most parents put off a will or trust in any case, it is highly debatable that such communication will ever occur. One noticeable and glaring error in the selection of a trustee (or administrator of a will) is where the trustor picks a spouse or child that, in many cases, has NO expertise to act in the capacity whatsoever. Being a blood relative does not signify capabilities in taxes, investments, estate planning, running a business or the host of other activities that may require expert judgment. Far too many estates have been ruined not just by the trustee, but due to the lack of foresight by the trustor. Surviving widows with no investment background (70% of women between the age of 34 to 54 said they didn't know how to invest) should NEVER be selected to be the sole trustee of a major trust.

3 When you add in the period of grieving on top of trying to understand and cope with financial decisions, they are apt (as well as men with no experience) to make bad decisions that could have a serious negative impact on trust assets. It is incumbent on the trustor to spend considerable time in selecting an appropriate party to act as trustee- or as co-trustee- in order to avoid these very serious problems. 2. If the trustor has some close friends or relatives with appropriate experience who could act as trustee, there is the additional advantage that they will have a far more personal interest in trust activities. The individual(s) may have first hand ability, knowledge or expertise particularly beneficial to the trust ventures (running a business for example) and may have the skill to retain the current list of investments which a corporate trustee would automatically sell. 3. But as with all cases in the use of individual trustees, they may move, refuse to serve, become physically or mentally incapacitated, etc. It is therefore ABSOLUTELY NECESSARY that additional (known as successor) trustees be added to the list so that they may take over when any of the above should happen. It's for these reasons as well that corporate trustees may be indicated as second in line or that they be designated co-trustees to being with. It may even be that the corporate trustee would become more actively involved with the personal aspect of the trust assets when working with an individual trustee and might even maintain trust assets (where feasible) when the first trustee is gone. Trustee Responsibilities: Your trustee s exact powers and duties will depend on the instructions in your trust agreement. In general, a trustee will: Hold the trust property Invest the assets Distribute the trust s income and/or principal to beneficiaries Make tax decisions concerning the trust Keep records of all trust transactions Provide accurate statements File tax returns Issue tax reports Answer questions that beneficiaries may have

4 Factors to consider in choosing a Trustee: Before appointing a trustee, you should evaluate if your candidate s personality and lifestyle fit with the duties and responsibilities of being a trustee. Specifically, you should consider: Is the person detail oriented and organized? Will their career or lifestyle afford them the time to devote to the responsibilities of being Trustee? Can they be sensitive and unbiased when decisions must be made? Does he/she have the investment expertise to manage the trust assets? Why consider using a Corporate Trustee or Asset Manager? A person s natural instinct may be to choose a family member, close friend, colleague or advisor to serve as trustee. Often this designated person may know the trust beneficiaries well, which can offer comfort to the grantor. Despite the advantages, choosing an individual trustee may have serious limitations. If a trustee s conduct is ever found negligent, he or she may be financially responsible for any losses suffered by the trust. Because of this and other concerns, many individuals choose to involve a corporate trustee. They thereby draw on talents and gain benefits that an individual trustee, no matter how skilled, can rarely provide. With an individual trustee, permanence is always an issue. Though they may start out with the best of intentions, people lose interest, get distracted by business or family concerns, move away, fall ill, or for any number of other reasons stop devoting as much care and attention to trust affairs as they once did. (The fact that they are often unpaid for their work doesn t help.) If the trust spans many years, an individual trustee inevitably will die, possibly to be replaced by a court appointee or by someone unknown to the grantor or beneficiaries. A corporate trustee can administer the trust for as long as the trust endures. A trustee has one overriding obligation to administer the trust within the bounds set by law, in keeping with the grantor s wishes as expressed in the trust agreement. In pursuing the trust s goals, the trustee must balance the needs of the current and future beneficiaries. This may call for fairness, sound judgment, sensitivity, tact, compassion, and the ability to mediate conflicts and make decisions that, while justified, may not be welcome. An individual trustee, often chosen because he or she knows the beneficiaries well, may for that same reason find it harder to make such decisions.

5 During the trust s existence, the trust s assets will need to be managed properly. In most cases, that involves overseeing a complex portfolio of investments, with careful attention to the distributions made to beneficiaries, both those receiving current income and those slated to receive either income or outright bequests in the future. The strategy may need to be revised from time to time to take into account the progress of portfolio investments or the changing circumstances of beneficiaries. Corporate trustees are experienced in investment management. An individual trustee, even one who has managed his or her own personal portfolio successfully, is unlikely to have the same level of skill. A competent corporate trustee will manage trusts by the book, with defined fiduciary procedures and account audits. Overseeing a trust can be time-consuming, technical and onerous. The trustee must review the legal papers, prepare and file tax documents, keep accurate accounting records, send trust statements, and maintain regular communications with beneficiaries. The trustee also needs to clearly identify, understand and follow both the specific written instructions of the trust document itself and the grantor s wishes, in unforeseen situations and in light of ever-changing tax and other legal requirements. A corporate trustee is in a better position to handle these complexities than an individual trustee, who is almost invariably managing a trust for the first (and probably the only) time. After contemplating a trust, you will want to carefully weigh the comparative advantages of using an individual or a corporate trustee. Many grantors appoint both an individual and a corporate trustee as co-trustees. Working together as partners, the corporate trustee carries out the specialized administrative and asset management tasks, while the individual trustee performs a broad oversight role and offers helpful insights into discretionary decisions involving the family. The Trust Company will work with you to develop an investment strategy that meets the shortand long-term goals described in the trust document. Through diversification, a competent trust company can meet the growth and income needs of the trust while controlling volatility and risk. The trust company appoints a trust administrator to handle your trust on a daily basis. Having an experienced corporate trustee helps avoid the unfortunate failures made by individual trustees who are unfamiliar with the administrative functions of a trustee. The changing landscape of the banking and financial services industries has affected trust clients and the services they receive. However, the professional trust company offers permanence and financial strength as well as the assurance that your trust will be managed at all times.