Choosing a trustee might be one of the most consequential decisions you’ll make when setting up a trust. It’s also one that many Colorado families agonize over, and for good reason. The person or institution you name will manage assets, make distributions, handle tax filings, and navigate family dynamics long after you’re gone. Get it right, and your estate plan works exactly as intended. Get it wrong, and you could set up your beneficiaries for years of frustration, conflict, or worse.
At Meurer & Potter, P.C., we’ve helped families throughout Denver and Greenwood Village create trusts since 1991. In that time, we’ve seen firsthand how the right trustee can make all the difference, and how the wrong choice can unravel even the most carefully drafted estate plan. This guide walks you through everything you need to consider when selecting a trustee for your Colorado trust, from understanding the role itself to asking the right questions before you make your decision.
What Does a Trustee Actually Do?
Before you can choose the right trustee, you need to understand what you’re asking them to take on. A trustee isn’t just a placeholder name on a document, they’re stepping into a fiduciary role with real legal obligations and practical responsibilities.
At its core, a trustee manages trust assets for the benefit of your named beneficiaries. That sounds simple enough, but the day-to-day reality involves:
- Investment management: Deciding how trust assets should be invested, balancing growth against risk, and adhering to the prudent investor standard under Colorado law
- Record-keeping: Maintaining detailed accounts of all transactions, income, and distributions
- Tax compliance: Filing trust tax returns (and sometimes state returns) annually
- Making distributions: Deciding when and how much to distribute to beneficiaries based on the trust terms
- Communication: Keeping beneficiaries informed and responding to their questions or concerns
Depending on your trust type, whether it’s a revocable living trust, an irrevocable life insurance trust (ILIT), or a special needs trust, the trustee’s duties can vary significantly. A trustee for a charitable remainder trust, for instance, has different obligations than one managing an IRA stretch trust.
The trustee also serves as a buffer between your wishes and your beneficiaries’ expectations. That can mean saying “no” to a beneficiary who wants more than the trust allows, or interpreting ambiguous language in the trust document. It’s a position that requires judgment, patience, and a thick skin.
Individual vs. Corporate Trustees in Colorado
One of the first decisions we help clients work through is whether to name an individual (like a family member or trusted friend) or a corporate trustee (like a bank or trust company). Both options have merit, and the right choice depends on your specific situation.
Benefits of Naming a Family Member or Friend
Naming someone you know and trust has obvious appeal. They understand your family, your values, and what you’re trying to accomplish. They won’t charge the ongoing fees that corporate trustees do. And there’s a personal connection that can make beneficiaries feel more comfortable.
Family members or friends also bring flexibility. They’re often more willing to work with beneficiaries on timing of distributions or to consider circumstances that a corporate trustee might handle more rigidly.
That said, individual trustees come with risks. They may lack financial or legal expertise. They could become incapacitated or pass away before the trust terminates. And serving as trustee can strain relationships, especially when a sibling is managing money for other siblings, or when a trustee must deny a beneficiary’s request.
We’ve seen situations where a well-meaning family member trustee made poor investment decisions or failed to file required tax returns, creating headaches for everyone involved.
When a Professional Trustee Makes Sense
Corporate trustees, banks, trust companies, or professional fiduciaries, offer expertise and continuity that individuals typically can’t match. They have investment professionals, tax specialists, and administrative staff. They don’t get sick, retire, or have conflicts with beneficiaries.
Professional trustees make particular sense when:
- The trust involves substantial assets or complex investments
- Family dynamics are complicated or contentious
- The trust will last for many years (like a trust for young children)
- Beneficiaries have special needs requiring careful management
- You simply don’t have anyone in your life suited for the role
The tradeoff is cost. Corporate trustees typically charge annual fees ranging from 0.5% to 1.5% of trust assets, which can add up over time. They also tend to be less flexible and more process-driven than an individual trustee might be.
Many of our clients in Denver and Greenwood Village opt for a hybrid approach: naming a trusted individual as trustee with a corporate co-trustee, or naming a family member with the option to hire professional help for investment management and tax preparation.
Key Qualities to Look for in a Trustee
Whether you’re considering a family member, friend, or professional, certain qualities separate effective trustees from problematic ones.
Integrity and trustworthiness top the list. Your trustee will have access to and control over assets that belong to others. They need to be someone who will always put beneficiaries’ interests first, even when no one is watching.
Financial competence matters too. The trustee doesn’t need to be a CPA or investment advisor, but they should understand basic financial concepts, be comfortable reviewing statements, and know when to seek professional help.
Organizational skills are essential. Trusts generate paperwork, lots of it. A trustee who loses track of documents, misses deadlines, or fails to keep proper records creates problems that can take years to untangle.
Communication ability often gets overlooked. Your trustee will need to explain decisions to beneficiaries, respond to questions, and sometimes deliver news people don’t want to hear. Someone who avoids difficult conversations or communicates poorly can create unnecessary conflict.
Impartiality becomes critical when multiple beneficiaries are involved. Can the person treat everyone fairly, even if they’re closer to one beneficiary than another? Will they be able to follow the trust terms even when a beneficiary pressures them?
Availability and longevity should factor into your decision. Is this person willing to serve, potentially for many years? Do they have the time to fulfill the trustee duties properly? Are they young enough and healthy enough to serve for the trust’s expected duration?
We encourage clients to have honest conversations with potential trustees before naming them. The role is significant, and someone who agrees out of obligation but lacks genuine willingness rarely makes a good trustee.
Colorado-Specific Legal Requirements for Trustees
Colorado has specific rules governing trustees that you should understand before making your selection.
Under the Colorado Uniform Trust Code, a trustee must be at least 18 years old and of sound mind. There’s no requirement that a trustee be a Colorado resident, though naming an out-of-state trustee can create practical complications, they may be unfamiliar with Colorado law, and traveling to handle trust matters becomes more difficult.
Corporate trustees operating in Colorado must be authorized to do business in the state. Banks and trust companies generally meet this requirement, but you’ll want to verify with any institution you’re considering.
Colorado law imposes a fiduciary duty on trustees, meaning they must act in the best interests of beneficiaries, avoid self-dealing, and exercise reasonable care and skill. The state follows the Uniform Prudent Investor Act, which establishes standards for how trustees should invest trust assets.
Trustees in Colorado also have reporting obligations. Unless the trust document says otherwise, they must keep beneficiaries reasonably informed about trust administration and provide accountings upon request.
One thing we emphasize to clients: the trust document itself can modify many of these default rules. At Meurer & Potter, P.C., we draft trusts that clearly define trustee powers, compensation, and accountability standards tailored to each family’s needs. Working with experienced Colorado estate planning attorneys ensures your trust document properly addresses these issues.
Questions to Ask Before Naming Your Trustee
Before you finalize your trustee selection, we recommend working through these questions:
For individual trustees:
- Are they willing to serve? (Don’t assume, ask directly)
- Do they understand what’s involved?
- Will they be able to work with your beneficiaries?
- Do they have any conflicts of interest?
- Are they geographically accessible?
- What’s their financial situation? (A trustee facing their own financial struggles may not be the best choice)
- Will serving as trustee damage their relationship with beneficiaries?
For corporate trustees:
- What are their fees, and how are they calculated?
- Who specifically will handle your trust?
- What’s their investment philosophy?
- How do they communicate with beneficiaries?
- Can they be removed if beneficiaries are unhappy?
- What happens if the company is acquired or goes out of business?
For any trustee:
- How will they handle distributions? Are they comfortable exercising discretion?
- What’s their approach to investing trust assets?
- How will they keep beneficiaries informed?
- Are they willing to work with your estate planning attorney and other advisors?
These conversations can feel awkward, but they’re far less uncomfortable than dealing with a trustee problem after you’re gone.
Naming Successor Trustees and Backup Plans
Here’s something many people overlook: your first-choice trustee may not be able to serve when the time comes. They might decline, become incapacitated, pass away, or simply resign. That’s why naming successor trustees is just as important as selecting your primary trustee.
We typically recommend naming at least two successor trustees, in order of priority. This creates a clear line of succession and reduces the chances that a court will need to appoint someone.
Your trust document should also address:
- How a trustee can resign: What notice is required? Who must they notify?
- How a trustee can be removed: Should beneficiaries have this power? Under what circumstances?
- How a new trustee can be appointed: If all named successors are unavailable, who decides?
Some clients name a “trust protector”, an independent third party with power to remove trustees, appoint replacements, or make certain changes to the trust. This adds flexibility but also complexity.
Another option we often discuss is giving beneficiaries (or a majority of beneficiaries) the power to replace a corporate trustee with another corporate trustee. This provides a safety valve if the institutional trustee isn’t performing well, without giving beneficiaries inappropriate control over distributions.
At Meurer & Potter, P.C., we spend considerable time with clients thinking through these contingencies. Estate plans need to work not just today, but decades from now when circumstances may look very different.
Conclusion
Choosing a trustee is a decision that deserves careful thought. The right trustee will protect your assets, carry out your wishes, and help your beneficiaries, potentially for many years. The wrong one can create conflict, waste money, and undermine everything you’re trying to accomplish.
Take time to consider both individual and corporate options. Look for the qualities that matter: integrity, competence, communication skills, and the ability to act impartially. Understand Colorado’s legal requirements and make sure your trust document addresses them properly. Have honest conversations with potential trustees before naming them. And always, always, name successor trustees.
If you’re creating or updating a trust and need guidance on trustee selection, we’re here to help. Our estate planning attorneys at Meurer & Potter, P.C. have been advising Denver and Greenwood Village families since 1991. We take the time to understand your family, your goals, and your concerns, then create a customized plan that works. Contact Attorney Michael T. Meurer, Attorney Gary Potter, or Attorney Matthew P. Zanotelli to schedule a consultation and start the conversation about your Colorado trust.
