Who Should Handle Your Assets After Death? Professional or an Amateur?
Most people like to start with considering friends and family members as trustees. They are going to be most familiar with you and your family, and they will understand your family’s dynamics.
In addition, family members often do not charge a trustee fee (although they are usually entitled to take a fee). Cost conscious clients see this as a plus, but it may not be the best decision in the long run.
Most individuals don't have experience on what is involved with being a trustee. Thus, they have to learn on the job and perhaps by trial and error. Unfortunately, that learning process is done at the expense of your assets and your beneficiaries.
Having a family member or friend serve could lead to resentment if the family member does or does not take a fee. Being a trustee can be a lot of work and time intensive. For example, your brother may resent not getting paid for his services while overseeing trust assets for your children. Your kids may not appreciate the work that is performed and may be perceived as being ungrateful. On the flip side, your children may resent their uncle getting paid from "their" money if he does take a fee.
Another disadvantage is that your family member may be "too close" to the family and may get caught up in the drama. Or, they may have a power trip and enjoy being in control of your beneficiary’s finances. You may want someone with a little more separation who will see your beneficiaries with a fresh set of eyes and treat them equally.
Instead, your family may be better served with a qualified bank that has expertise with trust administration. Professional trustees, like a bank, bring structure and oversight to the trust administration, including an experienced trust department that oversees the trust administration. You will pay for this service, but in many instances, it will be money well spent. They will make the tough decisions and tell beneficiaries “no” when appropriate. It is often advantageous to use a bank (i) when the beneficiaries do not get along, (ii) when there is a problem beneficiary, (iii) your beneficiaries are busy with life; or (iv) when you are dealing with larger estates or difficult to manage assets.
In short, family and finances can be a volatile mixture.
A drawback to a bank is that they may be perceived as too restrictive or inflexible. They also may be “tightfisted” in making distributions if it will reduce the assets under management that they are investing. These concerns can be addressed by giving a neutral third party, such as a trusted family member or advisor, the ability to remove and replace the trustee if necessary.
In summary, while individuals can perform the job, you should at least consider using a professional to do the job correctly and efficiently to help keep family harmony.