What are the Benefits of Naming a Corporate Trustee?
If you have a trust in place (or have contemplated putting one in place), chances are you’ve thought about who is best suited to serve as the trustee of your trust. Many people are inclined to name a family member or trusted friend, but what happens if they are unable or unwilling to serve? Do they have the time and skills necessary to serve in this capacity? The following are some of the benefits, as well as the disadvantages, associated with having a corporate trustee.
Benefits of a Corporate Trustee
- Often, individuals are not particularly knowledgeable in tax, trust law, financial planning, or investment management. Corporate trustees have trust officers and management teams with a broad range of knowledge in all of these areas, and years of experience administering trusts.
- In addition, corporate trustees have resources available to be sure that the administration is handled appropriately, including the proper accounting of principal and income. Individual trustees may not have access to the same resources and may not be familiar with trust accounting principles. Or, they may not have the time to handle all of the duties associated with serving as a trustee.
- Corporate trustees are regulated and audited. Individuals are not subject to mandatory oversight by a government regulator and are often administered without court involvement, making it more likely to be mismanaged (even with the best intentions).
- Individuals serving as a trustee who is related or has a close relationship with the beneficiaries may find it hard to be impartial. Corporate trustees are objective and are required to administer the trust in an unbiased manner under the terms of the trust agreement. This can help maintain family relationships since the difficult decisions lie with the corporate trustee (and not the family member or close friend).
- A corporate trustee can ensure continuity in the event of the death or disability of an employee – this is not necessarily the case when an individual is serving as trustee.
Disadvantages of a Corporate Trustee
- There is often a perception that a corporate trustee is a cold and impersonal option because they don’t know the family history or the beneficiaries personally. While this may be the case in many instances, we develop strong personal relationships with families at First Western Trust so that you (and your beneficiaries) feel comfortable working with everyone on our team.
- Another misperception is that a corporate trustee cannot be removed once appointed, and they must serve until the trust terminates. Many trust agreements include provisions that allow for the removal and replacement of a corporate trustee for any reason. So, if you are unhappy with a corporate trustee, it should be a fairly simple process to have them removed and replaced.
- There are fees associated with a corporate trustee. An individual trustee is also generally allowed to take fees under the trust agreement or applicable state law (although oftentimes a family member serving as trustee will decline to take any fees). An individual trustee may also incur expenses for the services they are unable to provide themselves – a corporate trustee may be able to provide streamlined services making it a cost-effective option for the trust administration. A corporate trustee should be able to provide you with a fee schedule so that all fees are transparent.
A popular alternative is naming a corporate trustee as a co-trustee. A co-trustee arrangement where an experienced trust professional serves with a trusted individual is often the perfect solution for many families. It also helps the individual trustee transition to less active management of the trust, while maintaining the ability to provide input on decisions.
Another option is naming a corporate trustee as the successor trustee so that when you (or your spouse) are no longer able or willing to serve as trustee, a corporate trustee can step in as the successor. At First Western Trust, it is generally a seamless transition when we are named as the successor trustee.
Your Estate Plan
Have you reviewed your estate plan recently? If not, changes in your life, your family, and in tax law may make this an excellent time to meet with one of our trust and wealth planning professionals. We will discuss your goals and concerns, provide you with tools to support your decision-making, and help identify areas where changes may be appropriate. We will also discuss how First Western Trust may assist your family as your trustee or personal representative.