CHOOSE CONTROLLERS NOW, BEFORE A CRISIS

 The person in control of the trust is called the trustee.  He 
 is responsible for management, making all decisions, and 
 managing the assets.  Often, he has exactly the same powers as 
 if he were acting as an individual.  He may have some limitations 
 to his power described in the trust.  A trustee can decline to 
 accept the original appointment.  However, after acceptance, a 
 trustee can't resign unless permitted by the trust documents or 
 by a court ruling.  It's fairly common to have co-beneficiaries, 
 co-trustees, successor beneficiaries and successor trustees.  
 Co-trustees normally must agree on all decisions, therefore 
 allowing either to have veto power.  This can create conflicts, 
 unhappiness, and other problems.  We recommend that singular 
 individuals have control at any one time, if possible.  Otherwise, 
 try to provide for a majority decision by appointing unequal 
 numbers of trustees or appoint a tie-breaker to resolve conflicts.
 
 In some trusts, the same individual can be creator, trustee, and
 beneficiary.  Thus, he or she has complete control and benefit of
 the assets, even while the assets are owned by the trust.  Even if
 the creator can't fill all the roles, the trustee and beneficiary 
 frequently are one and the same.  If it is of primary intent to 
 use the trust as a protector of assets; it is best if all positions 
 are NOT filled by the same person.
 
 SELECTING THE TRUSTEE
 
 You can see that the key controller is the trustee.  Once the trust
 is in place, the trustee makes all decisions.  For a trust to work
 as you'd like it to, you need to pick a reliable trustee.
 
 Can you act as your own trustee?  Sometimes, especially if you set
 up a revocable trust.  However, with most irrevocable trusts, where
 you want tax and asset protection advantages, you should name
 someone else as trustee, to establish separation of control. 
 Moreover, even if you act as trustee of your own revocable trust,
 you'll need to name a successor trustee, in the event the original
 trustee becomes unable to serve.
 
 When you choose a trustee or successor trustee, you want someone
 with integrity, whose judgment you trust.  If that someone has some
 financial ability, so much the better.  But, it's not a necessity. 
 Most of all, you'll want a trustee who'll have high concern for
 the trust beneficiaries in case unforeseen situations arise.
 
 Often, you won't find such a paragon to act as trustee.  That's why
 many trusts appoint co-trustees.  One trustee might be a family
 member, who'll be familiar with the personalities involved, while
 the other might be a financial institution (for example, a bank) or
 an individual who's comfortable handling money.
 
 Another approach is possible if you have a financial advisor you
 respect (your broker, for example) but whom you don't want to 
 name as trustee.  In this case, you might name  a relative or friend
 as trustee while naming your broker as the trust's investment
 advisor.  You could either name the broker formally in the trust
 documents or simply make a nonbinding recommendation to the 
 current trustee.
 
 Patience and prudence.  No matter who actually makes the investment
 decisions, the trustee has a fiduciary responsibility to the beneficiary.  
 The trustee is responsible to the beneficiaries--say, your widow and 
 your two minor children.  Fiduciary responsibility is a huge concern: 
 Errors could result in a lawsuit or damage to the beneficiaries.
 
 The basic rule is that a trustee must invest trust assets as a
 "prudent person" would, under the circumstances.  That doesn't mean
 all the assets must be invested in Treasury bills or Certificates
 of Deposit.  In fact, being overcautious can be imprudent.  In one
 case, a trust that invested solely in money market funds was judged
 imprudent because the return was too low.
 
 On the other hand, fiduciaries clearly are not expected to
 speculate wildly with trust assets.  Even if you, the creator, are
 the kind of investor who likes to take risks, the trustee is not
 supposed to follow in your footsteps.  If the trust takes effect
 after your death, for example, for the benefit of your heirs, the
 trustee may act prudently by liquidating most or all speculative
 investments such as limited partnerships, oil and gas deals,
 pink-sheet stocks, options positions, and so on.  New York Stock
 Exchange stocks, investment grade bonds, real estate, and cash 
 equivalents are usually the most appropriate trust investments.  
 Although no hard and fast rules apply, prudent investing tends to 
 mean holding a diversified portfolio.
 
 Leave an escape hatch.  One trap to avoid is locking your
 beneficiaries into a specific money manager, such as a bank trust
 department.  What if the bank disappears, merges, or doesn't perform 
 well?  Your heirs may not have any method of changing trustees.
 
 Unhappy trust beneficiaries can sue for a change in trustee, but
 such lawsuits usually fail unless severe misconduct can be shown. 
 Regardless of the outcome of the lawsuit, the bank usually will pay 
 its legal fees out of the trust fund.
 
 The solution is to give someone else leverage.  A co-trustee,
 perhaps a relative, might be given the power to change financial
 trustees.  You might even give the trust beneficiaries the right to
 change trustees, perhaps selecting from a list of acceptable
 institutions mentioned in the trust documents.
 
 Caution:  If the trust beneficiaries can change trustees or invade
 the trust principal, the trust may be subject to income and estate
 taxes or eliminate asset protection.  You need to limit the 
 beneficiaries' ability to get at the trust principal, or you are 
 giving "trustee-like" powers to the beneficiary.

 * When creating a trust, you need to carefully spell out the
 identities of the parties, their roles and the assets you mean to
 transfer to the trust.
 
 * Control can initally be retained by the creator, especially when 
 first getting comfortable with the concept and use of trusts.
 
 * Although you could give up control of assets, to gain tax
 advantages and asset protection, you still can continue to exert
 considerable influence over trust property.
 
 * Trusts generally have one or more beneficiaries and one or more
 trustees.  Someone can function as both trustee and beneficiary.
 
 * The trustee, as asset manager, is the absolute controller, so 
 considerable care should be taken in selecting trustees, co-trustees, 
 and successor trustees.  A lifelong friend may be more trustworthy, 
 experienced, and better than trusting or empowering relatives.
 
 * Trustees have a fiduciary responsibility to invest the trust
 assets prudently and CANNOT legally convert assets to others not
 named as beneficiaries.
 
 * When drawing up a trust, get professional advice from many
 sources, even if that means you end up spending substantial amounts.