A client once told me his three children were all smart and successful, so picking one to be his trustee would be simple. A year after his passing, two of them were no longer speaking to the third. The chosen son, acting with what he thought was perfect fairness, had made a discretionary distribution to his sister that his brother saw as favoritism. The trust was being managed, but the family was broken.
Choosing a trustee is one of the most consequential decisions in your estate plan. It is not an honorary title. It is a job—a demanding, often thankless job that requires financial acumen, deep impartiality, and a thick skin. The person or institution you name becomes the legal custodian of your legacy. Their judgment will directly impact the people you love most.
The choice is not the same for every family, but the considerations are universal.
The Two Paths: A Family Member or a Professional?
Most people immediately think of a family member—a responsible child, a sibling, a cousin. The logic is understandable. This person knows the family, understands the personalities, and will likely serve without a fee. They are invested in the family’s well-being on a personal level. For smaller, simpler trusts with straightforward distribution plans, this can be a sound choice.
However, this path is filled with potential conflicts. Can your daughter, as trustee, say “no” to her brother’s request for a loan from the trust without destroying their relationship? Can your son manage a multi-million dollar investment portfolio while also running his own business and raising his own family? The emotional toll can be immense. Placing one child in a position of financial authority over their siblings can introduce a dynamic that poisons relationships for a generation.
The alternative is a professional or corporate trustee—a bank’s trust department or an independent trust company. The immediate downside is cost. Professional trustees charge a fee, typically a percentage of the assets under management. They also won’t have an intimate knowledge of your family’s history. But what you get in return is significant: impartiality, expertise, and continuity. A corporate trustee isn’t swayed by family drama. Their decisions are based on the trust document and the law, not emotion. They have teams dedicated to investment management, tax compliance, and accounting. They don’t get sick, move away, or pass away—they provide a perpetual stewardship that an individual cannot.
More Than Just Managing Money
A trustee’s role is not passive investing. It is an active, administrative, and fiduciary responsibility. The person you appoint must be prepared for the real work, which includes:
- Filing annual fiduciary income tax returns (Form 1041).
- Keeping meticulous records of every transaction—every distribution, expense, gain, and loss.
- Communicating clearly and regularly with all beneficiaries, who have a legal right to be kept informed.
- Making difficult discretionary decisions based on the standards you set in the trust—a process that requires wisdom and objective judgment.
- Adhering to the strict legal standards that govern their conduct.
A trustee is a fiduciary—the highest standard of care under the law. This is a relationship of absolute trust and confidence, not to be entered into lightly.
The Legal Yardstick: Fiduciary Duty in New York
A trustee doesn’t just have a moral obligation to do the right thing; they have a legal one. In New York, a trustee’s investment decisions are governed by the Prudent Investor Act. Codified in Estates, Powers and Trusts Law (EPTL) § 11-2.3, this statute requires a trustee to “exercise reasonable care, skill and caution to make and implement investment and management decisions as a prudent investor would.”
This isn’t a suggestion; it’s a legal command. A trustee must consider the trust’s purposes, terms, and distribution requirements. They have a duty to diversify assets, control costs, and avoid speculation. If a well-meaning but unsophisticated family member invests trust assets poorly, they can be held personally liable for the losses. Ignorance is not a defense recognized by the Surrogate’s Court.
This duty of prudence is coupled with an unwavering duty of loyalty. The trustee must act solely in the interest of the beneficiaries. They cannot self-deal or place their own interests ahead of the trust’s. This is why appointing a co-owner of a family business in Manhattan to be the trustee of a trust that also holds shares in that business can create an immediate, and often insurmountable, conflict of interest.
An Intentional and Deliberate Choice
Your choice of trustee must be as deliberate as any other part of your estate plan. It’s not about who you love the most, but who is best equipped for the job. Consider their financial literacy, their available time, their temperament under pressure, and their ability to remain impartial.
You must also build in contingencies. Who will serve if your first choice is unable or unwilling to take on the role? I always advise clients to name at least a first and second successor trustee. Without this, the decision could fall to a court, which may appoint someone the family doesn’t know.
Before you write a name on that critical line in your trust document, I suggest a simple exercise: draft a one-page job description for your trustee. Outline the assets involved, the family dynamics, and the duties you expect them to perform. If you would like to discuss that description and who might be qualified to fill the role, our firm can schedule a review of your existing trustee designations.
