How to Choose Your Trustee to Match Your Farm Estate Plan

You’ve done the hard part. You’ve set up a trust and allocated assets. Now, who will oversee it after you’re gone? Choosing a trustee is a major financial and personal decision.

First, consider the duties this person or firm will do. Simply, a trustee takes legal ownership of trust assets, manages the trust and carries out your wishes. To do so, the trustee will perform such tasks as filing tax returns, updating farm-land leases and working with beneficiaries. 

People often default to a family member for ease and lower costs, but that might not be the best choice. 

“So much of my advice on who to choose depends on family dynamics,” says Breanna Young, attorney with Dentons Davis Brown Law in Des Moines, Iowa. “Even if the family members get along wonderfully, are we putting one child in the position of saying ‘no’ to another child?”

When should you involve a third party? Young encourages it if:

• You’ve had multiple marriages with multiple children.
• Your family thrives on conflict.
• You have both on-farm and off-farm heirs. 

You can choose anyone over age 18 to be a trustee. You could also hire a trust company, lawyer or bank. To help choose, understand the role.

CHECKS AND BALANCES 

Assess the size and complexity of your assets, recommends Polly Dobbs, attorney and owner of Dobbs Legal Group in Peru, Ind.
“The larger the value of assets, the more risk you face,” she says. “So, if you name Uncle Bobby because he’s your favorite and he’ll do it for free, but he squanders the money – it’s all gone. Uncle Bobby probably doesn’t have deep pockets to fix it.”

So, for sophisticated and large trusts, Dobbs suggests appointing a bank or corporate trust.

“If a bank is the trustee, they’re on the hook to do it perfectly,” she says. “Yes, banks charge an annual trustee’s fee, but you get the peace of mind of knowing that it will be done properly.”

As you explore non-family trustees, inquire about the fee structure. For farm assets, this can be key.

“With farmland, there isn’t that much more work for trustee to do if your trust includes 300 acres or 3,000 acres, and the value per acre is always in flux,” she says. “I will specifically write in my document the trustee’s fee shall not be based on the value of the real property owned by the trust, but reasonable based on actual services rendered.”

If your trust is mostly stocks and bonds, a trustee’s fee based on a percentage of assets might be fair. 

You can take a team approach, Dobbs says, slicing and dicing the duties so different people have different roles. You also want a plan for removing or replacing trustees.

“I always include flexibility, so if someone is not doing a good job, the trustee can be removed, and the beneficiaries could come in and appoint a new trustee,” she says. “In that case, I like for a corporate fiduciary to be a stopgap, so a greedy child can’t hijack the plan.”  

To access resources and tools to help guide your succession planning journey, visit FarmJournalLegacyProject.com