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Who makes the best trustee?

Many people use trusts to help manage their assets and pass those assets on to their heirs. When you create a trust, either now or to take effect under your will, whom do you want to choose as your trustee?

One or two individuals may come to mind. Literally, they are people you can, in a word, trust. But your trustee also needs other important qualities as well. Here are just a few of the things a trustee does:

Implement the trust. Study the terms of the trust and/or will. Take control of the assets and meet with the trustís creator or beneficiaries to determine income and principal needs. Transfer assets to the trustís name and set up records.

Keep records and handle money. Collect income from investments and reinvest proceeds of matured investments. Regularly remit income to beneficiaries and send detailed income and financial statements. Pay for beneficiariesí support, education and medical needs out of the trust, if required.

Manage assets. Monitor investments and make appropriate changes. Review the trust assets regularly for quality and performance. Supervise business and real estate interests.

Attend to tax issues. Keep records of taxable income and file income tax returns.

Monitor own performance. Seek legal counsel when necessary. Do not delegate authority. Avoid any conflict of interest.

Calculate proper share for final distribution to each beneficiary. Provide accounting and tax data. Arrange for transfer of the trustís assets.

As you can see, itís highly unlikely that one or even two individuals could be capable of carrying out all these responsibilities effectively. Not only is it a big job, it can be a stressful one as well: A trustee whoís a friend or family member can be caught in the middle of disputes between beneficiaries or become overwhelmed by the responsibility.

Itís also important to make sure your trustee has longevity and availability: He or she needs to last as long as your trust does without being distracted by illness, business or vacations.

Thatís why so many people turn to their bank or other financial institution to set up trusts. A good professional trustee has:

An experienced, highly trained staff that knows how to work with people.

Specialized knowledge about investments, taxes, accounting and sophisticated record-keeping

Unbiased investment judgment with no stake in the investment activity of any trust while serving as trustee.

Impartiality and the ability to remain uninvolved in family conflicts and not favor one beneficiary over another.

Financial responsibility with substantial capital and financial resources to stand behind all actions and decisions.

Choosing the right trustee is one of the most important parts of creating a trust. Using a financial institution as your trustee helps assure your assets will be handled with skill and impartiality on behalf of your beneficiaries.

Jeff Francis is vice president and senior investment officer for First Tennessee Brokerage.


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