Who Should I Appoint to Manage My Trust in Texas?

Although many people recognize the value of a trust as part of their Texas estate plan, they may not have gotten around to creating a trust because they are uncertain what type of trust to employ and who to appoint as the trustee under a trust agreement. When determining who to appoint as your trustee, you must consider the objectives that are motivating you to create the trust in the first place. Some of the considerations that may impact the type of trust to suit your needs include:

• Whether you want to maintain ownership and control over the assets
• Long-term care planning issues
• Tax and probate consequences/costs
• Flexibility to make changes to the trust
• Importance of creditor protection for you and your beneficiaries

This is far from a comprehensive list of factors that must be weighed when deciding on the type of trust that will fit your needs and who to appoint as the trustee. It should be clear that an experienced Texas estate planning attorney can be of significant assistance in making these decisions by explaining the drawbacks and benefits of different types of trust arrangements. Below we have provided an overview of considerations about who to appoint as your trustee when creating a trust:

Appoint Yourself as Trustee: The decision to make yourself the trustee over your own trust is really a ruse that is not effective. The government recognizes that when you put your assets in a trust and maintain control over the assets as a trustee you really have done nothing more than play a shell game. This is typically a meaningless trust arrangement that will not really accomplish much. This type of trust arrangement can do significant damage if you do not have sound legal advice from a competent Texas estate planning lawyer. If you place your business in the trust, you hit the top tax bracket at $11,950 of income whereas you do not hit the top tax bracket of 39.6 percent until you make $400,000 when you file taxes as an individual.

Appointing a Family Member: While this can be a sensible option, you cannot appoint a family member who is a beneficiary under the trust. If the trustee also is a beneficiary, the trustee’s share is not protected from creditors by the trust arrangement. Because protection of assets against creditors is an important benefit of a trust, it makes little sense to set up a trust in this manner. There is another significant drawback to picking a family member to be your trustee. The available options may be limited if you have a falling out with the family member. If the family member mismanages the trust and make a poor investment, you will probably be hesitant to file a lawsuit against the trustee to hold him or her accountable? These are unfortunate options that may be faced if you use a family member as your trustee.

Financial Institution or Professional: This is a better option and includes those who are professional trustees. These individuals and institutions have insurance if they make a mistake and lose a portion of your assets. These types of trustees also have the knowledge and experience to make sound investments of trust assets. Because they are unrelated to you, there are none of the adverse family dynamics that impede holding the trustee accountable for negligence.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

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