When people sit down to set up a trust, naming one of their adult children as the trustee, or worse, co-trustees, often feels like the obvious choice. They’re family, you trust them, and frankly, they’ll do it for free. I understand the appeal. But over the years, I’ve watched this “obvious” decision create more headaches than almost any other estate-planning mistake. This week, let’s talk about why handing your child the trustee job isn’t always the gift you think it is, and what to weigh before you do.
First, let’s be clear about what a trustee actually does. A trustee isn’t just a title you hand out to show love and trust. It’s a real job with real responsibilities. The trustee has to manage investments, keep detailed records, file tax returns, make distributions according to the rules of the trust, and treat every beneficiary fairly. This can go on for years, sometimes decades. Most adult children already have busy lives, careers, and families of their own. Piling the administration of a complex trust on top of all that is a much heavier lift than most people realize.
Another issue is that they may not have the expertise either. Managing a trust properly takes financial and legal knowledge that most people simply don’t have. Your child may be wonderful, responsible, and well-intentioned, and still have no idea how to manage a portfolio, interpret trust language, or navigate tax rules. In my opinion, this is where good intentions run headfirst into reality. A trustee who doesn’t know what they’re doing can make honest mistakes that cost the trust real money, and those mistakes can be difficult and expensive to undo.
Frankly, my biggest concern about naming your child as a trustee is that it can tear a family apart. The moment you name one child as trustee, especially if they have siblings who are also beneficiaries, you’ve changed the family dynamic. Now one child controls the money the others are counting on. Even in close families, that setup breeds suspicion. Why did the distribution take so long? Why did they invest it that way? Are they charging a fee? I’ve seen siblings who got along their entire lives stop speaking over exactly this. The parent’s goal was to keep things simple and in the family, and instead they lit the fuse on a conflict that outlives them. I tell clients all the time, if you never want your kids to get along again, then by all means, put one in charge of the other’s money. Making one child ask their sibling if they can have money can be a recipe for disaster.
It gets even trickier when the child serving as trustee is also one of the beneficiaries. Now they’re in the impossible position of making decisions that affect their own inheritance and their siblings’ at the same time. If the trust gives the trustee discretion over how much to distribute and when, every choice they make can look self-serving, even when it isn’t. That’s not a fair spot to put your child in, and it’s not a fair spot for the other kids either.
In addition, many parents don’t realize that a trustee can be held personally liable for mistakes. If a beneficiary believes the trustee mishandled things, they can take legal action, and your child could be on the hook. You may think you’re handing them a role of honor. What you may actually be handing them is a legal and financial risk they never asked for.
None of this means a trust is a bad idea, or that a child can never serve. It just means you should go in with your eyes open. In many cases, a professional or corporate trustee, such as a trust company, is worth the cost because they bring expertise, objectivity, and no emotional baggage. Another option is to name a child as co-trustee alongside a professional, so your child stays involved but has expert help and a buffer against family friction. There’s no single right answer, but there are a lot of options beyond simply defaulting to your oldest kid.
This is exactly the kind of decision you should walk through carefully with your estate-planning attorney and your financial advisor before you sign anything. The right choice depends on your family, your assets, and the personalities involved, and a good advisor has seen how these situations actually play out in real life.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
