A Matter of Trust: Key Considerations When Appointing a Trustee

The importance of selecting a good trustee for effective estate planning cannot be overstated. The trustee’s role is multifaceted, requiring a high level of expertise, diligence and an unwavering commitment to act in the best interests of the beneficiaries. The right trustee not only ensures compliance with legal and regulatory requirements but also provides invaluable support and guidance throughout the trust’s lifecycle. Here are some key aspects that beneficiaries and settlors should consider when appointing a trustee.

Expertise and Knowledge

A good trust administrator should have a deep understanding of the applicable laws and regulations governing trusts. Since legislative frameworks can often change, the trustee must stay on top of any changes, working with the right professionals to obtain specialized guidance where needed.

Trustees must pay close attention to the type of assets they are safeguarding, thoroughly understanding the specific terms of the trust, monitoring the performance of the assets and ensuring that all legal and regulatory requirements are met.

Once established, the trust deed should not be filed away and forgotten. Regular reviews and potential amendments to the trust structure are essential to adapt to changing family circumstances or developments in legislation, ensuring it remains effective over time.

Commitment and Integrity

Trustees have a fiduciary duty to act in the best interests of the beneficiaries. This requires a high level of integrity and a commitment to ethical conduct, ensuring that personal interests do not conflict with their duties. Trusts often span many years, requiring trustees to maintain their responsibilities over an extended period. A reliable trustee demonstrates a long-term commitment to managing the trust effectively and consistently. This involves staying actively engaged, being proactive, and adapting to changing family circumstances and dynamics over time to effectively safeguard the family’s wealth.

Good Record-keeping and Accounting

The role of a trustee involves meticulous record-keeping, regular reporting and well-established practices to manage the trust and any underlying companies. A diligent trustee ensures that these tasks are performed accurately and on time, maintaining transparency and accountability, and ensuring that all key information is accessible and well-organised, should it be required at any point during the life of a trust..

Good Communication

As with any relationship, good communication is crucial to making the trustee-family relationship a positive experience for everyone involved. Without clear, frequent and open communication, this relationship is likely to fail. At best, poor communication will result in tension between the parties and unmet expectations; at worst, it can lead to costly litigation, fractured relationships, and the loss of trust assets.

Effective communication should extend beyond providing annual statements or reviewing the investment performance of trust assets. It is essential for a trustee to spend time with the beneficiaries in order to truly understand their family dynamics and circumstances. This deeper level of engagement enables the trustee to make informed decisions that are genuinely in the best interests of the beneficiaries.

Reputation and References

Before appointing a trustee, it is beneficial to review their history, reputation and regulatory status. References from previous clients or professional peers can provide insight into the trustee’s reliability and effectiveness. Certifications from recognized professional bodies can also serve as indicators of a trustee’s qualifications and commitment to maintaining high standards.

Appointing the right trustee is a cornerstone of effective estate planning. A trustee with the right expertise, diligence and commitment can significantly impact the trust’s success, ensuring that the beneficiaries’ interests are protected and the trust’s objectives are achieved. Families should prioritise qualities such as integrity, good communication skills and longstanding experience when choosing a trustee, and ensure that the trustee is prepared to engage proactively and maintain a long-term relationship. By carefully choosing a competent and reliable trustee, families can secure their wealth and legacy for future generations.

By Christina Economou, Business Development Director, Trident Trust

(This article first appeared in the 2024 edition of The Cyprus Journal of Wealth Management, commissioned by Eurobank Cyprus and published by IMH. Click here to view the article. Click here to view the entire magazine online.)