Who Should You Name As A Trustee In New York? Pros And Cons

Choosing a trustee is one of the most critical decisions you’ll make when setting up an estate plan. A trustee doesn’t just manage money. They manage relationships, legal obligations, and long-term family harmony. In this article, we explore…

• The legal responsibilities of trustees.
• The risks and benefits of choosing friends or family to oversee a trust.
• Whether a professional trustee might be the right fit.

What Is The Legal Role And Responsibility Of A Trustee In New York Estate Plans?

In New York, a trustee is a fiduciary, which means they’re legally obligated to act in the best financial interests of the trust’s beneficiaries. They are responsible for:

• Managing trust assets
• Making investment decisions
• Distributing funds according to the terms of the trust
• Consulting legal, tax, or financial professionals as needed

Some trustees are given full discretion over how and when to distribute income or principal. Others are bound by very specific instructions. In either case, the trustee serves as the financial steward of the trust, ensuring that the beneficiaries are cared for in accordance with the original intent of the person who created it.

What Risks Come With Naming A Friend Or Sibling As Trustee?

It may seem natural to name someone close to you, like a friend or sibling, as a trustee. After all, the word trust is right there in the title. But that trust must go beyond personal rapport. Here are the key risks to consider:

Lack Of Financial Experience

The person doesn’t need to be a financial expert, but they must know when to seek professional advice.

Potential Bias Or Influence

Friends or siblings may be more easily influenced by family members, especially in emotionally charged situations.

Limited Understanding Of Fiduciary Duty

They may not fully grasp that their duty is to the beneficiaries, not to you or other family members.

That said, if the person is reliable, impartial, and willing to lean on professionals for help, naming a non-professional trustee can work. But if there’s uncertainty or no clear candidate, it might be safer to consider a professional trustee.

Should I Hire A Professional Or Corporate Trustee For My Plan?

In some cases, hiring a corporate or professional trustee, such as a bank, law firm, or trust company, is the smartest choice, especially when:

• Family dynamics are strained or complex
• No one close to you is able or willing to serve
• The trust contains significant or complex assets

However, there are trade-offs. Professional trustees charge fees, usually based on a percentage of the trust’s value. On top of this, many corporate trustees have minimum asset thresholds, often in the $750,000 to $1 million range. All the while, services vary. Some will handle taxes and filings, others won’t.

If you qualify financially and don’t have a trusted individual available, a corporate trustee can offer impartiality and structure. But if a reliable family member can take on the role, that route is often more personal and cost-effective.

What Are The Pros And Cons Of Naming Co-Trustees In A Trust?

One of the main advantages of naming co-trustees is the ability to divide and share the responsibilities of managing the trust. This way, no single person bears the full weight of the trust’s duties. Co-trustees offer a built-in system of checks and balances, ensuring that decisions are not made unilaterally. This can help prevent any one trustee from acting in a way that may not be in the best interests of the beneficiaries.

For example, in cases involving blended families with children from previous marriages, it is common to appoint co-trustees. Typically, one trustee might be chosen from each side of the family (one from the husband’s children and one from the wife’s children). This arrangement promotes fairness and oversight, ensuring that both sides have a voice in the administration of the trust. Additionally, this arrangement provides reassurance and peace of mind for the clients, knowing that both parties are working together to manage the trust.

However, there are also potential downsides to appointing co-trustees. The most significant drawback is that it can slow down the process of managing the trust. Logistically, if there are two or more co-trustees, all of them must be involved in decisions, such as opening accounts or handling significant transactions. This can create delays, as each trustee must review and sign off on various actions. The coordination required can be cumbersome and time-consuming.

Moreover, if a dispute arises among the co-trustees, and the trust document does not clearly outline a mechanism for resolving such conflicts, it can lead to significant issues. Disagreements could escalate into litigation, resulting in costly legal battles and delays in decision-making. This conflict could potentially freeze the administration of the trust, preventing timely action and resolution. If the co-trustees are not able to work together harmoniously, it can jeopardize the smooth management of the trust and its assets.

What Do You Tell Clients Who Feel Torn Between Naming A Responsible Child Versus A Neutral Third Party As Trustee?

This is one of the most common dilemmas in estate planning. A responsible adult child may seem like the obvious choice, but emotional tension among siblings can turn a well-intentioned decision into a flashpoint for conflict. Favor the responsible child, especially if they’re financially literate and trusted. This can save time, money, and legal fees.

Avoid putting a child in the crossfire. If family dynamics are fractured and likely to erupt in court battles, it may be wiser to appoint a neutral third party to avoid placing that child in a no-win situation.

Ultimately, every estate plan should be designed around family dynamics, not just legal logic. The best trustee is not always the most financially savvy. It’s the one who can fulfill the role faithfully, communicate clearly, and preserve harmony wherever possible.

Still Have Questions? Ready To Get Started?

For more information on choosing the right trustee in New York estate planning, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (631) 483-7796 today.