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A Guest Blogger to Close 2009

I never realized how nerve racking it could be when your friend, mentor and boss asks you to keep his blog current while he is on vacation. Combine the fact that I am a neophyte to the blog game with the fact that I am deathly afraid of sullying the good name of Mark’s Investment Blog and it creates the perfect storm for a restless night and morning.

In any case, by way of introduction, my name is John Clausen and I work for Mark in the Wealth Management Department at BankChampaign. I practiced law for 5 years in Champaign before joining the bank almost 3 years ago (I know…a lawyer and a banker…let the jokes fly). I handle most of the trust administration duties, estate probate and financial planning at the bank while helping Mark as much as possible in the investment management area. As such, while my periodic posts are sure to be void of the sexy graphs, technical charts and market scuttlebutt to which you have become accustomed, my hope is that you can glean some useful information from my periodic posts.

Below you will find an short article that I originally pieced together for the Active Senior, which was then reproduced for the most recent issue of the The Neil St. Journal, the bank’s quarterly newsletter.

First thing is first though. If, like me, you have no hope of ever visiting some of the places Mark travels to and you travel vicariously through him, he is safely in Transylvania (the highlighted portion in the map of Romania below), which he said was beautiful. I asked him all of the important questions regarding Romania and, for those interested, the Romanian national beer, Ursus, is not palatable. I am sure he and his friends will find other sustenance.

Transylvania

Happy New Year to you all! Be safe and have fun tonight! I tip my cup to a joyous and prosperous 2010 for all of you. This first post was designed to be introductory in nature and to see if I could actually work this blog machine. If this post turns out acceptable, I may try and find a juicier topic and post again early next week. Alternatively, if I mangle this first attempt, Mark will be back mid-week to restore the status quo, my hand will be smacked with a ruler and my blogging privileges may forever be taken away.

UNDERSTANDING THE ADVANTAGES OF A TRUST:
ISSUES IN SELECTING A TRUSTEE

Many individuals create a Trust to take advantage of the management expertise of the potential Trustee, so it’s important that the Trustee’s qualifications match what is expected.

The role of a Trustee is fiduciary in nature, meaning that the Trustee must act at all times only for the exclusive benefit of all Trust beneficiaries. If he or she does not, personal liability may result. The responsibilities of a Trustee include: (1) compliance with legal issues, (2) properly investing trust assets, (3) decision making (specifically in making distributions of income and principal in light of the needs of the beneficiaries) and (4) accounting and record-keeping duties.

Some of the qualities to look for in selecting a Trustee include: (1) personality traits like integrity, honesty, confidentiality; (2) the requisite knowledge base and experience necessary to be an effective manager and custodian; (3) time availability to properly handle the various issues and complexities of a trust; (4) administrative capabilities for record-keeping responsibilities; and (5) costs and fees charged to the Trust.

Given the various fiduciary responsibilities, a common question centers on who can best serve in the role of Trustee. Many times, first thoughts turn to family members, who are familiar with the Grantor, his or her intentions and the issues affecting the family. Relatives are also frequently willing to serve at little or no cost.

All of these advantages are often overshadowed by the pitfalls of a family member acting in a fiduciary role. The family member may lack the requisite expertise to serve in such a capacity. If the Trustee reaches out to organizations who do have expertise (particularly in investing and accounting), the cost savings from selecting the family Trustee may be negated. The family member may lack impartiality, especially when confronted with making discretionary decisions regarding distributions to family members who may be exerting pressure on the Trustee. If the family member Trustee is also a beneficiary, this can also exacerbate problems.

Selection of a Professional Trustee, such as a bank or trust company, may help alleviate some of these issues. Professional Trustees are impartial and are well versed in Trust administration, investment management and taxation. As such, the costs incurred are often worth it to the Grantor and the Beneficiaries.