SUMMARIZED FLOWCHART REGARDING TRUSTEE SELECTION
MOST FLEXIBLE: FAMILY TRUSTEEAllow a spouse, child, or descendant (or another family member) to serve alone as his/her own trustee.
Various factors should be weighed to determine whether allowing a family member to serve as his/her own trustee is wise, e.g., (1) judgment abilities and objectivity, (2) financial experience and sophistication, and (3) knowledge of trust and accounting rules/concepts, just to name a few. The ability to commit a substantial amount of time to serving as a trustee is also a significant factor.
Adding another family member might provide additional protection and benefits, but can also lead to friction and administrative burdens as a practical matter. Appointing multiple family members to serve as co-trustees requires very careful consideration and is generally not the optimum planning scenario.
RELATIVELY FLEXIBLE: FAMILY TRUSTEE PLUS INDEPENDENT/CORPORATE CO-TRUSTEERequiring an "independent" or "corporate" co-trustee can, if properly structured, provide (1) tax benefits (e.g., preventing a child or a descendant from being estate-taxed if he/she is serving as trustee of his/her own trust) and also (2) protection from creditors' claims.
It is always important to build "checks and balances" into estate planning. Therefore, the beneficiary should generally always have the right to remove and replace the independent/corporate co-trustee, though he/she should generally be restricted to appointing another independent/corporate co-trustee as its replacement. This type of system can produce excellent results in terms of decision-making ("wisdom"), protection and tax leverage, and even investment returns due to what is hopefully the wise selection of a skilled independent or corporate co-trustee.
(ARGUABLY) LEAST FLEXIBLE: CORPORATE TRUSTEERequiring a sole corporate trustee can provide the same benefits as the "family trustee + independent/corporate co-trustee" option. In addition, a corporate trustee might represent a wise choice where, for example, (1) a sophisticated trust is involved (e.g., a charitable lead trust or a special needs trust), (2) a beneficiary is incapable of managing his/her own affairs (and might even "get into trouble" if allowed to provide trust administration input on those issues), and/or (3) there are multiple beneficiaries in multiple jurisdictions that could use a more "global" service provider.
Corporate trustees, like other professional trustees, charge a fee for their services. However, that fee often includes investment management (or "brokerage" services) or vice versa. Therefore, a corporate trustee might not cost "more." Experience and the ability to stand behind the services provided are valuable.