What is a Professional Trustee?

Jim B.

A professional trustee is a person or institution hired to administer a personal trust. The various duties of a trustee include following the instructions included in the trust, managing and investing the assets within it, and distributing money and assets among beneficiaries as stipulated. Professional trustees are often hired due to the grantor of the trust either wanting impartiality in the trust's management or desiring someone with expertise in different investment strategies to manage it. Others may stick with choosing a friend or relative to be the trustee to avoid the hefty fee attached to hiring a professional.

A professional trustee is a person or institution hired to administer a personal trust.
A professional trustee is a person or institution hired to administer a personal trust.

When a person chooses to endow a trust, it is usually with the intention of protecting the wealth that he has amassed in his lifetime and safely passing that wealth on to his beneficiaries. As such, the person who forms the trust, also known as the grantor, must choose a trustee who can follow the stipulations of the trust after the grantor dies or becomes incapacitated. A person who is formally trained to perform these duties on behalf of the grantor is known as a professional trustee.

The duties of the professional trustee depend upon the stipulations of the specific trust being served, but there are duties common to most trusts. Trustees must manage the assets of the trust, whether that includes money, businesses, or property. They are also tasked with investing any assets in a low-risk fashion to make sure the wealth survives, and ideally grows, for future generations to enjoy. In addition, the trustee must make sure to distribute all assets or monies due to beneficiaries in a timely and accurate manner.

Choosing a professional trustee may give the trust's grantor more certainty than if he chose a friend or family member to carry out the duties. Someone with a personal relationship with the beneficiaries may be tempted to play favorites when distributing the assets rather than adhering to the instructions of the trust. Being a trustee is a time-consuming duty as well, something that might not be suited for everyone. A professional will make sure to perform these duties, and he also has the expertise to deal with a complex trust's stipulations as well as the investment knowhow to strengthen the trust over the years.

There are some disadvantages to hiring a professional trustee. For one, the fee can be prohibitive, as most professionals either take a percentage of the trust they are managing or take a minimum fee for their services. In addition, a professional trustee usually likes to deal in terms of cash and securities rather than other assets, such as a family business. Since this is the case, professional trustees may be inclined to sell such assets, meaning that the grantor must make careful stipulations in the trust to prevent this from happening.

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