If you have a trust, you likely have named yourself as the current trustee and your spouse or partner as the co-trustee. If you were to become incapacitated or die, your spouse or significant other would then serve as your successor trustee. But what do you do in the case where you or your successor trustee are not comfortable or capable serving in that role? An alternative is to name a corporate trustee. A corporate trustee is simply a trustee that is a professional institution/corporation instead of an individual.
The following are the key benefits of naming a corporate trustee to serve as the acting trustee, the co-trustee or the successor trustee of your trust:
The trustee of a trust is responsible for administering the trust account, ensuring the safekeeping of any assets in the trust, record keeping, accounting, monitoring and initiating distributions as outlined in the trust, coordinating and preparing tax documents, monitoring the investment manager of the trust assets and paying bills. A corporate trustee performs all of these tasks on an ongoing daily basis for perhaps hundreds to thousands of different trusts. Thus they have the capability, know-how, professionalism and process in place to handle these tasks if you or your proposed individual trustee does not have that same comfort or experience level.
A corporate trustee will follow the trust instructions exactly as they are described within the trust. This is part of their fiduciary responsibility to the grantors and beneficiaries of the trust. This avoids potential conflicts of interest between family members. I have seen numerous occasions when family all seem to get along until you put monetary assets in front of them. Some family members feel more favored then others and sometimes decisions are not always made that are in the best interest of the person they should be financially providing for.
3. Fiduciary Responsibility
Similar to a NAPFA Registered Financial Advisor, a corporate trustee has a fiduciary responsibility to any grantors (you, spouse or partner) and any beneficiaries of the trust. This means they must put your interests before their own. It is the highest level of trust, loyalty and care available in the financial industry.
4. Perpetual Life
A corporate trustee is typically a corporation with an ongoing time horizon. It will not become sick, incapacitated, or pass away while serving as your trustee.
5. Flexibility in Role
You can outline in your trust the exact role you would like the corporate trustee to fulfill. A corporate trustee can serve as the acting trustee, a co-trustee or the successor trustee.
6. Peace of Mind
Relieving your family and friends of the trustee burden will not only provide peace of mind to them, but also to you. Knowing that your financial affairs are being handled in the most efficient and prudent manner with a professional team of administrators and advisors is many times well worth the cost of the service.
7. Coordinate With Your Financial Advisor
There are generally two types of corporate trustees: 1) those that serve solely in the administrative trustee role and 2) those that additionally manage the trust assets. If your financial advisor has a comprehensive understanding of your financial situation and they are already managing your portfolio, then you may want to consider hiring a corporate trustee that serves solely in the administrative role. If you are working with a financial advisor affiliated with NAPFA, then the benefit to you is that you potentially would have two fiduciaries working as a team on your behalf, your investment strategy would not need to change and your accounts would not need to transfer when a trustee change is ready to be made.
How Do I Find A Corporate Trustee?
Your financial advisor and/or estate planning attorney are typically a good referral source for locating a qualified corporate trustee. Many financial advisors provide ongoing comprehensive financial planning, including advice regarding estate planning, and thus have a network of qualified referral sources to meet your specific needs.