Choosing the Right Trustee: Family Member vs. a Professional

One of the most consequential decisions in any estate plan is who will serve as trustee. The trustee’s job is more than just bookkeeping; it involves managing assets, following complex tax rules, distributing money to beneficiaries and documenting every decision. A trustee must act solely in the beneficiaries’ best interests, even when family dynamics are delicate or markets are volatile. For many families, the choice comes down to whether to appoint a trusted relative or hire a professional corporate trustee. Each option offers distinct advantages and drawbacks. Understanding them helps you select a trustee who can steward the trust with integrity, competence and compassion.

Duties and Responsibilities of a Trustee

Before considering who should serve as trustee, it’s important to grasp the scope of the role. Trustees are fiduciaries, meaning they have a legal duty of loyalty and must administer the trust according to its terms and applicable law. This includes:

• Managing assets prudently: Trustees are responsible for investing and safeguarding the trust’s money and property. They must adhere to the “prudent investor” standard—balancing growth with preservation.

• Distributing assets appropriately: Trustees must interpret the trust document and make distributions according to its instructions, such as paying for a beneficiary’s education, health or support.

• Record Keeping and taxes: They must keep detailed records, prepare accountings for beneficiaries and file any required tax returns.

• Communication: Trustees should communicate regularly with beneficiaries about the trust’s performance and decisions.

With these obligations in mind, let’s examine the case for and against appointing a family member or a professional trustee.

Appointing a Family Trustee: Familiarity and Flexibility

A family trustee often knows the beneficiaries personally and understands the family’s history, values and dynamics. This familiarity can make them more sensitive to beneficiaries’ needs and preferences. They also may charge little to no fee, saving the trust administrative costs. Family trustees can be flexible, adjusting distributions or investments quickly because they are not constrained by institutional policies.

However, family trusteeship comes with significant challenges. Loved ones may lack the expertise required to navigate complex investments, tax rules and fiduciary laws. They may inadvertently favor one beneficiary over another or be influenced by their own personal interests, violating the duty of impartiality. Managing a trust is also time‑consuming; balancing trustee duties with personal life can strain relationships. Without oversight, mistakes can expose the trustee to personal liability and create conflict among beneficiaries.

Appointing a Corporate Trustee: Expertise and Impartiality

Corporate trustees—often law firms, banks, or trust companies—bring professional expertise. Their staff includes attorneys, accountants and investment managers who understand fiduciary law, tax regulations and sophisticated investment strategies. Because they are neutral parties, corporate trustees can make impartial decisions, reducing the potential for family conflicts. They offer continuity; if a trustee retires or leaves the company, another professional steps in seamlessly.

The trade‑offs are that corporate trustees charge fees, which reduce the trust’s assets. Beneficiaries may feel a corporate trustee is impersonal or bureaucratic. Institutional policies may limit flexibility, and big trust companies often have minimum asset requirements.

Factors to Consider When Choosing a Trustee

Selecting between family and corporate trustees is not one‑size‑fits‑all. Here are several considerations:

1. Complexity of the Trust

If the trust holds operating businesses, real estate or complex investment portfolios, or if it will last for multiple generations, a corporate trustee’s expertise may be indispensable. Simpler trusts, such as those designed to pass a house and some savings to adult children, might be managed successfully by a family member.

2. Family Dynamics and Neutrality

Closely consider relationships among beneficiaries. If there is tension or mistrust, a neutral corporate trustee can serve as an impartial arbiter. Conversely, when beneficiaries get along and value personal engagement, a family member may provide a warmer touch.

3. Financial and Legal Knowledge

Some families contain individuals with legal, accounting or financial backgrounds. A family trustee with these skills can be a cost‑effective option. However, for those unfamiliar with fiduciary duties, professional guidance is crucial.

4. Time Commitment and Availability

A trustee must be available to respond to beneficiary requests, manage tax filings, and monitor investments. Retirees with time may be ideal family trustees. Professionals with demanding careers may be poor candidates. Corporate trustees offer 24/7 institutional oversight.

5. Cost

Corporate trustees charge fees typically based on a percentage of the trust’s assets. Family trustees often serve for free or at minimal cost. However, the cost of professional mismanagement by an inexperienced trustee can exceed corporate fees through tax penalties, investment losses or litigation.

6. Hybrid Approach

Many families opt for co‑trusteeship—a family member and a corporate trustee working together. The family co‑trustee provides the human element and conveys the grantor’s values, while the corporate co‑trustee supplies expertise, continuity and liability protection.

Although this arrangement can lead to additional costs, it often balances the strengths of both options and reduces risks.

Best Practices for Families Selecting Trustees

1. Have candid conversations. Discuss responsibilities, expectations and potential conflicts before appointing a family member. Make sure the prospective trustee fully understands the scope of the job and the time commitment.

2. Document the decision. Clearly state in the trust document whether the trustee can hire professionals (investment advisors, accountants) and whether a successor corporate trustee should step in if the family trustee becomes unable to serve.

3. Review the trust periodically. Life changes—such as marriages, divorces, deaths or the birth of new beneficiaries—may necessitate revisiting trustee choices.

4. Educate the trustee. Provide training or resources, especially for family trustees, to understand fiduciary duties and common pitfalls. Encourage them to seek professional advice when needed.

Conclusion: Align the Choice with Your Goals

The decision of who should oversee your family’s trust is a crucial part of estate planning. Family trustees offer familiarity and a personal touch but can be susceptible to conflicts and mistakes. Corporate trustees provide expertise, impartiality and continuity, though at a cost.

There is no universally “best” choice. Consider the trust’s complexity, family relationships, available expertise and desired level of professional oversight. A hybrid approach, with both a trusted family member and a corporate trustee, can often provide the right balance. By carefully weighing these factors, grantors can secure a trustee arrangement that honors their legacy and supports their loved ones for years to come.