For most high-net-worth New Yorkers, the decision to create a trust is the easy part. The harder decision — and often the more consequential one — is choosing who will serve as trustee. The trustee is the person or institution responsible for administering the trust, managing its assets, communicating with beneficiaries, and exercising discretion over distributions, sometimes for decades after the grantor's death.
The trustee's performance can determine whether a trust accomplishes its goals or destroys family relationships. Yet in my experience, the choice of trustee is often treated as an afterthought — the eldest child, a trusted friend, or the family accountant, named without serious consideration of whether the role actually fits.
This article walks through the actual job of being a trustee, the realistic tradeoffs between the categories of trustees available in New York, and the structures that high-net-worth families use to avoid the most common mistakes.
What a Trustee Actually Does
The role of a trustee is broader and more demanding than most people appreciate. A trustee in New York operates under fiduciary duties imposed by the Estates, Powers and Trusts Law and by common law. The core responsibilities include:
Asset management. The trustee holds legal title to the trust assets and is responsible for managing them prudently. For a trust holding a diversified investment portfolio, this means working with investment advisors and overseeing performance. For a trust holding real estate, a closely held business, or art, it means substantially more — engaging property managers, business advisors, appraisers, and other specialists.
Distributions. Most trusts give the trustee discretion over distributions to beneficiaries, often within parameters like "health, education, maintenance, and support." The trustee has to decide what to give, when, to whom, and in what amounts. These decisions can be contested by beneficiaries and require the trustee to maintain careful documentation.
Tax compliance. Trusts file their own tax returns, sometimes in multiple jurisdictions. The trustee is responsible for ensuring those returns are filed accurately and on time, that estimated taxes are paid, and that distributions are properly reported on K-1s to beneficiaries.
Recordkeeping and reporting. New York fiduciaries are required to maintain detailed records of trust activity and to provide accountings to beneficiaries on request or on a regular schedule. Inadequate records are one of the most common sources of trustee liability.
Beneficiary communication. A trustee has to communicate clearly and consistently with beneficiaries, who may have competing interests, may be of different generations, and may not understand or agree with the trust's terms. Skilled communication can prevent conflicts. Poor communication produces litigation.
Exercising judgment in difficult situations. Beneficiaries get divorced, develop addictions, mismanage their finances, file for bankruptcy. A trustee has to decide how the trust responds — whether to make distributions that might be reachable by creditors or a divorcing spouse, whether to withhold distributions to a beneficiary who is causing harm to themselves, whether to honor a request that conflicts with the grantor's apparent intent.
This is not a passive role. It is, for any meaningful trust, a serious ongoing responsibility that requires time, expertise, and the willingness to make hard decisions.
The Categories of Trustees
In New York, families typically choose from four categories of trustees, each with distinct advantages and disadvantages.
Family Members
The most common default — and often the wrong one for high-net-worth trusts.
Advantages. Family members know the family's values and history. They have personal investment in the family's wellbeing. They are usually willing to serve without significant compensation. For modest trusts with simple terms, a family member is often perfectly adequate.
Disadvantages. Family members frequently lack the financial sophistication to manage substantial assets. They are subject to family dynamics that can compromise their judgment — the trustee child who cannot say no to a sibling's distribution requests, the surviving spouse who treats trust assets as personal funds, the cousin who lacks the time and discipline for the recordkeeping. Family trustees are also exposed personally to potential beneficiary lawsuits, sometimes by the very family members they are trying to serve.
For trusts that hold concentrated business interests, complex investment portfolios, or assets that will be administered for decades, naming a family member as sole trustee is often a poor fit — even when that family member is intelligent and well-intentioned.
Professional Individuals
Attorneys, accountants, and financial advisors who serve as individual trustees in their professional capacity.
Advantages. Professional individuals bring expertise, independence, and accountability. They typically maintain professional liability insurance. They know how to draft accountings, manage tax filings, and exercise fiduciary discretion. Their personal involvement gives them flexibility that institutional trustees lack.
Disadvantages. Professional individuals are mortal. A 55-year-old attorney named as trustee of a dynasty trust intended to last 90 years will not be serving for the trust's full duration. Continuity requires a succession plan. Professional individuals also have practice obligations that can compete with the trustee role, and their fees, while typically lower than corporate trustees', are not nominal.
For families looking for professional administration with personal attention, a professional individual — often paired with a corporate co-trustee — can be an excellent choice.
Corporate Trustees
Banks and trust companies that administer trusts as a core part of their business. Major institutional trustees include the trust departments of large banks and dedicated trust companies, including those domiciled in jurisdictions like Delaware and South Dakota.
Advantages. Corporate trustees offer institutional continuity — the entity will outlive any individual. They have professional staff dedicated to trust administration, sophisticated investment platforms, and robust compliance and recordkeeping systems. They are highly regulated and carry substantial assets to satisfy any potential liability.
Disadvantages. Corporate trustees can feel impersonal. The trust officer assigned to a family may change every few years. Distribution decisions are often made by committees rather than by individuals who know the family. Fees are higher than other options — typically a percentage of assets under administration, often around 1% per year for substantial trusts. Some corporate trustees are inflexible in ways that frustrate family beneficiaries.
For very large trusts intended to last across generations, corporate trustees are often essential. For smaller trusts or families seeking high-touch service, they may be a poor fit.
Co-Trustees and Bifurcated Structures
For high-net-worth families, the increasingly common solution is not to choose between these categories but to combine them.
A typical structure pairs a family member (who knows the family and beneficiaries) with a corporate co-trustee (who handles administration, recordkeeping, tax filings, and investment oversight). The family member provides personal knowledge and flexibility; the corporate co-trustee provides expertise and continuity. Decisions requiring discretion are made jointly.
A more sophisticated variant is a directed trust — a structure in which the trust is divided into specific functions (investment management, distribution decisions, administration) and a different fiduciary or non-fiduciary party is responsible for each. Delaware and several other jurisdictions have well-developed directed trust statutes; New York has been more cautious, though New York-situs trusts can sometimes be structured in similar ways through careful drafting.
For irrevocable trusts intended to last decades, the directed trust model is often the most efficient way to combine the strengths of family knowledge and institutional capability.
Special Considerations for Trusts Holding Specific Asset Types
The right trustee depends substantially on what the trust will hold.
Closely held businesses. A trust that owns an interest in an operating business needs a trustee who can engage with management, evaluate financial reports, and exercise oversight that is meaningful but not intrusive. A corporate trustee with a dedicated business interests group, paired with a family member who has business judgment, often works well. A general individual trustee without business experience is often poorly equipped for this role.
Real property. Trusts holding real estate require active management — leasing, maintenance, taxes, insurance, periodic decisions about sale or refinancing. The trustee should either have direct experience with real property or be willing to engage and supervise property managers.
Art, collectibles, and unique assets. Specialized assets need trustees who understand their valuation, insurance, storage, and disposition. Major corporate trustees have specialty groups for these assets; smaller institutions may not.
Concentrated equity positions. A trust holding a single stock position presents specific challenges around diversification, fiduciary duty, and the grantor's intent. The trustee needs to understand the duty to diversify and how to exercise it consistently with any directions in the trust document.
The Mistakes I See Most Often
Several patterns recur in trustee selections that fail.
Naming a trustee who cannot say no. A trustee who cannot decline distribution requests from beneficiaries — whether because of family dynamics, professional pressure, or temperament — undermines the entire purpose of having a trust. If the goal of the trust is to provide structure and protection, the trustee has to be able to enforce that structure.
Naming a single individual without succession. A trust intended to last decades cannot rely on a single individual trustee. The trust document should name successor trustees in series and should typically also include a mechanism for beneficiaries or a trust protector to appoint additional successors.
Failing to consider the trustee's exposure. Family member trustees often do not understand that they can be sued personally by beneficiaries for breach of fiduciary duty. Without insurance and without professional support, they bear real personal risk. Many family trustees would not accept the role if they understood the exposure.
Using a corporate trustee without specifying expectations. Corporate trustees vary enormously in service quality and responsiveness. Selecting one without diligence — interviewing prospective trustees, comparing fees, understanding service models — produces predictable disappointment.
Failing to use a trust protector. A trust protector is a non-trustee party with limited but meaningful powers — typically including the power to remove and replace trustees. A well-drafted trust protector provision provides a check on the trustee without compromising the trust's tax or asset-protection structure. For long-term trusts, this is one of the most useful provisions a grantor can include.
How High-Net-Worth Families Should Approach the Decision
A useful framework for choosing a trustee:
1. Identify what the trust will hold. Investments, business interests, real property, life insurance, art — different asset classes call for different trustee skills.
2. Identify how long the trust is expected to last. A short-term marital trust ending at the surviving spouse's death calls for a different solution than a dynasty trust intended for grandchildren.
3. Identify the beneficiaries' likely circumstances. Trustees of trusts for beneficiaries with substance abuse issues, financial irresponsibility, or potential exposure to creditors or divorcing spouses face different challenges than trustees of trusts for stable, financially literate beneficiaries.
4. Consider what the family actually wants from the trustee. Some families want a trustee who is highly responsive and flexible. Others want a trustee who serves as a buffer between beneficiaries and assets. Both are legitimate goals but they call for different selections.
5. Build in succession and oversight. Whatever trustee structure is chosen, include named successors, a removal mechanism, and ideally a trust protector. Long-term trusts that rely on a single individual without succession planning routinely fail.
FAQ
Can I serve as trustee of my own trust? Of a revocable trust, yes — most grantors serve as initial trustees of their own revocable trusts. Of an irrevocable trust, generally no, particularly if the trust is intended to provide estate tax or creditor protection. Serving as your own trustee in those contexts typically defeats the trust's purpose.
How much do corporate trustees charge? Fees vary, but a typical corporate trustee fee is approximately 1% of assets under administration per year, sometimes with minimums or sliding scales. Some institutions charge separate fees for investment management, tax preparation, and other services. Understand the full fee structure before selecting.
Can a beneficiary also serve as trustee? A beneficiary can serve as trustee, but the law treats this with caution. A beneficiary-trustee whose discretion includes the power to make distributions to themselves can create serious tax and creditor-protection problems. Most well-drafted trusts limit a beneficiary-trustee's discretionary powers or require an independent co-trustee for distribution decisions.
Can I change the trustee after the trust is created? For a revocable trust, yes — you can amend the document. For an irrevocable trust, it depends on the document. Many irrevocable trusts include removal provisions exercisable by the grantor, by beneficiaries, or by a trust protector. If no such provision exists, removal typically requires a court proceeding.
What if the trustee mismanages the trust? Beneficiaries can petition the court for an accounting, for removal of the trustee, or for surcharge — financial recovery — for losses caused by breach of fiduciary duty. These proceedings are expensive and disruptive. A well-drafted trust includes mechanisms for less drastic remedies, including the trust protector's removal power.
Closing Thought
The right trustee can preserve and grow a family's wealth across generations. The wrong trustee can produce litigation, family fracture, and the destruction of the very assets the trust was intended to protect.
There is no universally correct choice — the right trustee depends on the trust's purpose, the family's circumstances, and the assets involved. What is universal is that the choice deserves serious deliberation, not default assumptions.
For families establishing significant trusts, the right approach is to design the trustee structure deliberately: combining family knowledge with professional capability, building in succession, providing oversight through a trust protector, and selecting institutional partners through careful diligence rather than convenience.
Done well, this work pays dividends for decades. Done poorly, it produces some of the most painful disputes high-net-worth families ever face.