How to Choose the Right Trustee for Your Trust
The law in New Jersey gives a trustee a lot of authority over the administration of a trust. That can be either a good or bad thing depending on who it is that is acting as trustee. Your trust is much more than just a document that specifies which heirs get what percentage of your trust estate when you die. A trust details how and when beneficiaries are to receive their distribution(s), who is to take charge over investment(s) and any ongoing businesses, and many additional issues important to your estate. Therefore, the choice you make to be the trustee for your trust is an important decision as part of your estate planning. That’s because it is your trustee who is legally responsible for carrying out all of the instructions and details that you set forth in the trust. Let’s discuss this subject now in greater depth.
Understanding the Duties of a Trustee Under N.J. Trust Law(s)
Duties of a Trustee Under a New Jersey Trust
While the powers of a trustee can be considerable, you as the creator of a trust can determine in the trust agreement the extent of the trustee’s powers. A trustee must thoroughly understand the duties which accompany his or her status as the fiduciary of trust assets and income. The duties of a trustee vary from state to state, but in New Jersey, a trustee’s duties include the following, at a minimum:
- The trustee has a duty to carry out the trust in accordance with the terms of the trust agreement.
- The trustee has a duty not to delegate the trustee’s duties to another individual-any duty which calls on the trustee to exercise skill and judgment may not be delegated (e.g., investment responsibilities). However, this duty does not prohibit the trustee from hiring professionals including legal counsel, accountants, and professional investment advisors to evaluate the suitability and nature of trust investments.
- The trustee has a duty to exercise a reasonable degree of skill and care as if the trustee were dealing with his or her own property and investments.
- The trustee owes a duty of loyalty, good faith, and honesty to the beneficiaries to administer the trust solely in their best interests. This duty of loyalty prohibits the trustee from self-dealing with the trust.
- The trustee has a duty to possess, protect, and preserve the trust property.
- The trustee must use ordinary diligence and care in filing claims.
- The trustee has a general duty to defend the trust and the interests of the beneficiaries against those who challenge the validity of the trust.
- While the trustee is not an insurer of the trust assets, the trustee must use reasonable care and diligence in preserving and protecting the property (e.g., obtaining insurance on the property if an ordinary, reasonable, prudent individual would do the same).
- The trustee has a duty to segregate trust property. A trustee is required to keep trust property separate from the trustee’s own property. If a trustee co-mingles trust funds with his or her own property, the trustee is liable for any losses resulting from the co-mingling.
- The trustee has a duty to make the trust property productive and increase its value. The standards normally used to make the property productive are controlled by what is called the “prudent person” rule. This rule defines the decisions, and the trustee may take to acquire, invest, reinvest, exchange, sell, and manage trust property in a manner that people of ordinary and reasonable prudence would undertake.
- The trustee has a duty to treat all trust beneficiaries fairly and impartially. If a trustee has the duty to distribute income according to the trustee’s discretion, the trustee’s decision is to be made in good faith. A trustee must avoid behavior which favors one beneficiary over another. If one beneficiary is favored over another, and the trustee cannot show good cause for the different treatment, the trustee may be accountable to a beneficiary whose interests were financially injured.
Choosing the Right Trustee
Choosing a Friend as a Trustee. Is This the Right Choice?
When choosing a person to be the trustee of your trust, you need to answer this question:
- Who can step into my place and confidently act as I would in carrying out my wishes if I’m unavailable? In other words, who do I trust the most in the world to make the decisions I would have made if I were alive or competent to make them?
I tell every client when discussing a trust and selecting the right trustee to choose someone they have full faith and confidence in. You should feel at ease that he or she will carry out your instructions as they are written in your trust and estate planning documents. Some typical trustee choices include a:
- Close family friend
- Close family member
- Adult Child
- Professional trustee
- An honest and trustworthy person willing to service
Choosing a Trustee to Help Manage Your Financial Affairs
Your first thought may be to select a family member as a trustee. However, you should consider several factors:
- Does the appointed family member or close friend have the experience and knowledge to manage your financial affairs appropriately?
- When asked to make a decision that may affect another family member, will the appointed family member or friend be able to act in a fair and unbiased manner?
- Will naming a family member or friend have the necessary amount of time in his or her life to manage the trust?
- Does the family member or friend want to manage your financial affairs?
- Are other family members willing to serve as trustee if the appointed family member is unable to do so?
While you may feel completely secure in giving this huge responsibility to a close friend or family member, there are several situations when that is not wise or possible.
Instead of selecting a family member or friends, an alternative is to name a professional trustee together with a family member (or yourself) as co-trustees. Doing so allows the family member to have a voice in the administration of the trust without being burdened by the day-to-day investment decisions and administrative responsibilities. It also may be suitable to name a professional trustee as successor trustee in case you or your family member is unable to serve.
Can a Trustee of a New Jersey Trust Just Quit and Walk Away?
Choosing an Outside Trustee
If you do not have a close friend or relative that you feel comfortable leaving this job to, or if by selecting one of the heirs to be a trustee may result in a conflict between them and other trust beneficiaries, then there are other options you can consider. You can hire an outside trustee like:
- Your bank’s trust department
- A trust company
- Your lawyer
- A professional trustee
Selecting a Professional Trustee
When choosing a professional trustee, it’s important to consider one who will:
- Administer Your Trust Plan – Choose a professional trustee who will execute your wishes as specified in the trust agreement. A professional trustee will include experienced trust administrators, portfolio managers and other trust professionals to service your needs.
- Have a Sound Investment Philosophy – Look for a professional trustee who has a written investment philosophy, which includes quality investments based on investment objectives. A professional trustee also should be capable of helping you and your family develop a strategy to manage and distribute your assets according to your wishes, as specified in the trust agreement.
- Provide Ongoing Communication – Select a professional trustee who will collaborate with you and your family, financial advisor, accountant, attorney and other estate-planning professionals. In addition, make sure the professional trustee you select provides monthly statements to help you evaluate whether you’re on track to meet your goals. Open communication, including phone calls and face-to-face meetings with your professional trustee, is important.
A professional trustee can work with you, your financial advisor and your estate-planning professionals to help determine a plan that is best for you and your family. But be careful, DO NOT under almost all circumstances select a large trust fund brokerage company or mega-bank. They are a train wreck and very difficult to work with. I know this from interfacing with them over the decades. Feel free to meet with me to discuss selecting the right trustee.
Remember…a professional can sometimes work more effectively than a family member or friend, which saves your heirs money, time and relationships. While there are benefits to not having a family member involved as the trustee there are also some drawbacks to using a bank or trust company as your trustee.
First, banks and professional trustees charge fees for their services. They generally will only (not always, so check around) serve as trustee with a minimal estate value of around $1,000,000. Their fees are based on a percentage of the trust estate. They also tend to be very conservative and cautious. This may or may not be a good thing. You must decide that.
No matter whom you choose as your trustee, you want to be sure that you have full confidence in them to do exactly as you want, no matter what other people say. There may be heirs who are unhappy with the terms and conditions of the trust and will try to influence the trustee to do as they want. Knowing that you have a strong, trustworthy individual protecting your wishes will provide peace of mind.
Fredrick P. Niemann Esq.
If you have any questions or would like to meet to discuss selecting a trustee for your NJ trust
Contact Fredrick P. Niemann, Esq. toll-free at
(855) 376-5291
or email him at
He is happy to answer your inquiries when you meet. You’ll find him easy to talk to and eager to find solutions for your particular concern(s) or legal matter.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Trust Attorney
Trust attorney serving these New Jersey Counties:
Monmouth County, Ocean County, Essex County, Cape May County, Mercer County, Middlesex County,
Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County