Advisor Flipbooks

If your state has not enacted this type of rule, or if you are authorizing investments that would not satisfy the prudent investor standard, you may provide specific instructions in the governing instrument to override the application of state law. Investments held by corporate trustees are likely to be more closely monitored than they could be by an individual. This constant watch permits the trustee to respond rapidly, as the market or other circumstances require, and to adjust investment strategies accordingly. Likewise, the corporate trustee usually has more resources to identify investment opportunities and to take advantage of them. Tax lssues There are many tax issues in trustee selection Designating an individual trustee, especially a family member, can have unanticipated, adverse tax consequences due to control over disposition of income or assets. Although a complete discussion of tax concerns is beyond the scope of this article, some basic principles apply: › A family member who serves as a trustee and is a beneficiary of the trust could be taxed on the trust's income if he or she has the power to distribute trust principal or income to himself or herself. › If the family member/trustee has children, who are also beneficiaries of the trust, and uses trust income for the support of those children, then he or she will be taxed on that income. › If the trustee has the power to spend trust principal for his or her own benefit (as well as the benefit of other beneficiaries) and he or she dies holding this power, the trust assets subject to that power may be included in his or her estate and subject to federal estate tax consequences. › A corporate trustee or an individual who is not the grantor, a beneficiary, or a related or subordinated party, may be given complete discretion to distribute income and principal to beneficiaries without causing the trust to be included in the estate of the grantor or the beneficiary or to become taxable as trust income. 5 Conclusion There is no automatic answer to the question of who shouId be named as trustee in your financial and estate planning. You must make the decision based on the facts of your particular family, tax and investment situation. By discussing important factors with your attorney and other financial advisors, you will be able to make an educated and wise selection that suits your goals for your personal situation. There is no automatic answer to the question of who should be named as trustee in your financial and estate planning NOTE: Before selecting any trustee, the candidate should be shown a copy of the trust document to determine if the trustee is willing to serve under its terms. It is costly, both in terms of time and money, if the named trustee refuses to accept the position after the trustor's death.

• Cover