Choosing a Trustee

Why the trustee is not an afterthought

Both the NING/DING and the completed gift non-grantor trust require a trustee outside your home state — the state income tax exemption depends on it. And the exemption's third test, disciplined distributions, is executed entirely by the trustee. A single careless distribution to a New York resident can trigger the throwback tax and unwind years of savings. The trustee is not a formality in these structures. The trustee is the structure.

What “professional trustee” actually means

Not simply an accountant or an attorney. A professional trustee is someone whose business is serving as trustee — who administers many trusts, carries the staff and systems to do it, and treats the role as a practice rather than a favor.

Occasionally a family is fortunate: a niece who practices law in Delaware, a sibling long settled in Florida or New Hampshire. A family trustee in the right state can work. But the role carries genuine fiduciary liability, and most families do not have that person — which is why the directed-trustee industry exists. Nevada in particular has trust companies that will serve as directed trustee at a cost that is modest against what these structures save.

The questions we ask before recommending one

1. How many trusts do they administer? Is this a practice, or would yours be a first?
2. What is their philosophy on distributions and investments — and does it fit how this family actually operates?
3. What stands behind the name? Staff, trust accounting systems, continuity if a key person leaves.
4. Do they know the state income tax rules cold — including precisely which distributions must never be made, and why?
5. What happens when something goes wrong? Can they litigate, and are they willing to? A trustee who resigns at the first sign of conflict leaves the family worse off than no trustee at all.

A friendly trustee is not a rubber stamp

Clients sometimes hear “independent trustee” and picture an obstacle. The better picture is a knowledgeable ally. When a client needs value out of a trust, a capable trustee's job is to find the route that serves the beneficiaries without damaging the structure — a distribution where appropriate, a loan where better, the trust purchasing the asset directly where best of all. The difference between a good trustee and a poor one shows up exactly at these moments.

We serve as trustee for clients where that is appropriate, and we work regularly with directed and corporate trustees in Nevada, Delaware, and New Hampshire where an out-of-state trustee is required.