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Reasons Why

Reasons Why Not to Appoint an Individual as a Trustee

1

Most individuals fail to understand their personal financial liability as a trustee, and the long-term risks they take with every decision; accepting a role with little or no pay and unlimited liability.

2

When serving as trustee on behalf of a family member’s or friend’s request, many individuals aren’t prepared to make the kinds of difficult decisions that are often required of them. A lack of personal objectivity may make it difficult to serve as an unbiased gatekeeper.

3

Individual trustees often aren’t prepared for the time commitment associated with their role as a fiduciary. Consequently, they aren’t able to adequately administer the trust given their other time commitments; particularly when it in infringes upon their ability to earn their maximum potential income.

4

Most individual trustees don’t have adequate training or the educational background to serve as a knowledgeable trustee, nor have a comprehensive understanding of trust law, of state and federal tax implications, or of complex assets such as hedge funds, real estate, or a private enterprise.

5

Unlike corporate trustees, individual trustees usually aren’t experienced in the nuances of the trust language as detailed by trust lawyers.

6

Whereas corporate trustees follow a clearly defined decision-making process, individual trustees seldom have the background and experience necessary to establish a sound administration process – they simply don’t know what they don’t know.

7

Because they seldom document their decisions or supporting rationale, individual trustees may open themselves up to potential liability for many years.

8

Naming an individual as trustee presents a continuity risk because individuals may not outlast all trust beneficiaries.

9

Oftentimes, individual trustees don’t have the appropriate accounting and reporting tools. Additionally, they don’t know that a trust must account separately for income beneficiaries and remainder beneficiaries.

10

Individuals are not likely to have the proper insurance coverage to act as a trustee. Thus, in situations where an error is made, or mismanagement is determined, individual trustees do not have the resources to provide redress to beneficiaries.

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