When you are setting up a trust, one of the components is designating a trustee. The trustee has significant responsibility, so it is important to find just the right person. Or should you choose an institution instead? According to the American Bar Association, both trustee options have benefits, but they each also come with downsides.

The duties of your trustee boil down to managing the money you are leaving to your beneficiaries. This typically includes the following:

• Collecting assets of the estate
• Making investments
• Paying bills
• Filing accountings
• Consulting with beneficiaries

If you have a relative who is capable and trustworthy, and who has a good relationship with the beneficiaries, you may have your answer. The duties could also be divided between co-trustees if one person lacks the knowledge that another has, and they can work well together. The IRS has rules preventing family members from being co-trustees for certain types of trusts.

When you choose one or more individuals, there is the issue of mortality, though. Your trust may last for generations. At the very least, you will need to name a successor trustee.

Financial institutions such as banks or trust companies have the advantages of expertise and longevity. However, the person who administers the trust may change as employees come and go. This factor may make it difficult for your beneficiaries to develop any sort of interpersonal relationship with those who have control of their financial matters. Naming an institution as trustee will also cost money.

You may be able to compromise by naming the institution as the successor to the individual trustee. Naming an institution as an independent financial advisor to the relative trustee may also be an option, and it may cost less than the fees the institution would charge as a trustee. This information is general in nature and should not replace the advice of an attorney.