Recently, a client decided to include a corporate trustee as part of their estate plan. When discussing the matter, they were surprised at how affordable they can be, and that they were glad they choose that route. Thinking of that conversation and how important it is to name a proper trustee, I wanted to highlight some benefits of corporate trustees.
The Quad Cities Times’ recent article entitled “Benefits of a corporate trustee” warns that care should be taken when selecting someone to serve in this role. Now, many clients have loved ones in their lives who are capable of serving as a trustee or other fiduciary, but for some, family members may not have the experience, ability and time required to perform the duties of a trustee. Those with personal relationships with beneficiaries may cause conflicts within the family. You can name almost any adult, including family members or friends, but think about a corporate or professional trustee as the possible answer. I also covered how to choose a trustee here: https://www.galliganmanning.com/how-to-pick-a-trustee/
Here are some reasons to use a corporate trustee:
Experience and Dedication. Corporate trustees can devote their full attention to the trust assets and possess experience, resources, access to tax, legal, and investment knowledge that may be hard for the average person to duplicate. It’s their job and they hire professionals with backgrounds in these areas. Many people who choose a corporate trustee do so for this reason.
Relative Cost. This may seem a strange reason to consider a corporate trustee. Most people don’t consider them at all because professionals will charge fees to serve. However, trustee fees are often regulated by law or by the trust document. Both individuals such as family members, and corporate trustees might only be able to charge the same rate. Given the fact the trust might pay your middle child and an office of professionals the same rate, that isn’t a bad deal. Further, corporate trustees sometimes take assets under management. This means they would invest your assets for you, and therefore make money on the investments like a financial advisor does. If they do, they often include those fees at a reduced rate when serving as a trustee. This means you actually save money in the end. It is also possible that they don’t take money under management so that your investment advisor can continue to invest the funds if that’s your preference.
Successor Trustee. If you choose to name personal trustees, you may provide in your trust documents for a corporate trustee as a successor, in case none of the personal trustees is available, capable, or willing to serve. Corporate trustees are institutions that don’t become incapacitated or die. You should consider the type of assets you own and then choose the most qualified trustee to manage them.
Middleman. Clients sometimes struggle to admit to their estate planning attorney that their families don’t get along. They don’t want to talk about how a child of theirs struggles with addiction, is dependent on them for support or otherwise would be difficult for a family member trustee to deal with. In that situation, corporate trustees have the benefit of professional detachment. The beneficiary can be as angry with them as they want, and the anger won’t be directed to one of your loved ones. This can make professional trustees an attractive middleman or wall between a difficult beneficiary and the rest of the family.
In sum, many estate owners can benefit from the advantages of a corporate trustee.
Ask an experienced estate planning attorney when working on a trust about naming the appropriate corporate trustee, and the advisability of including terms for your registered investment advisor to manage assets for your trust.
Reference: Quad Cities Times (Nov. 28, 2021) “Benefits of a corporate trustee”