People establish trusts for many reasons. You might set up a revocable living trust during your lifetime or your will could create a testamentary trust. A trust might be for your own benefit or your spouse, child or grandchild could be the beneficiary. Purposes of trusts include the management of assets for aging individuals or minor children as well as protection of assets from challenges such as divorces or creditors.

Regardless of the type of trust or the reason for establishing a trust, a crucial decision when setting up a trust is, "Who will be the trustee?"

With a revocable living trust, most people simply name themselves as trustees. However, these documents still list other people as secondary trustees, in the event the primary trustee is unable to continue managing the trust. Obviously, with a testamentary trust that is established by your will, you must choose someone else to be your primary and secondary trustees.

So, how do you make that decision?

First, think about what a trustee does. They have to make investment and tax decisions about the assets held by the trust. They are charged with administering the trust according to the specific language of the trust, which might include determining when distributions are made to children or grandchildren, and how much those distributions will be. If the trust has multiple beneficiaries, they may have to juggle the competing needs and desires of those beneficiaries. They may have to say “no” to a request for funds.

Who is the best person to fill that role?

Perhaps your spouse can serve as the trustee — but an elderly spouse with little experience or interest in these matters may not be the wisest choice. Also, even if a spouse is named as primary trustee, the choice of the secondary trustee remains.

Another option is to select an adult child as the trustee. This can be an effective choice, but it certainly doesn’t fit in all cases. Is the adult child knowledgeable and do they have the time to serve as trustee? Do they live nearby? If there are additional children, will problems arise among them due to the selection of the trustee? Do you have confidence in the child’s decision-making abilities.

When children are unable or unwilling to be trustees, you might consider a close friend. Of course, if they are a friend, perhaps you shouldn’t ask them, because being a trustee can be a lot of work! In addition, you might be putting your friend in an uncomfortable position, forcing them to serve in a formal role that they really aren’t prepared for or desire.

In some situations, a professional, such as an accountant or attorney could act as trustee. The professional brings an outside, third-party viewpoint into the management of the trust and also avoids the sometimes sticky situation of choosing one child over another one to be trustee. But, some challenges still remain. Does the professional have time to do this? They might be experienced in some areas, but how will they deal with issues in which they don’t have any background?

What fees will they charge for their services?

Finally, sometimes no individual is available to serve in the role of trustee. In that situation, an institutional trustee, a trust company, is selected. Trust companies are obviously experienced in the management of trust assets, and unlike individuals, they don’t die or move away. They are detached from all the family issues — which can be a good or bad thing.

Traditional trust companies administer the trust and manage the investments of the trust. Alternatively, there are independent trust companies that handle trust administration issues, such as distributions to beneficiaries, while outsourcing the investment decisions to an investment manager that you select.

Who keeps an eye on the trustee?

Of course, the beneficiaries of the trust have a vested interest in staying aware of what a trustee is doing, but minor children or even adult beneficiaries that are uninterested or uneducated won’t do this. Therefore, in some situations a "trust protector" is appointed. A trust protector is not a trustee, but has the authority to remove a trustee and appoint a replacement trustee, if they determine it is in the best interests of the trust beneficiaries.

Trusts are valuable tools for managing and protecting your assets for future generations and your choice of trustee is critical to its success. Choose carefully.