During the estate planning process, we often see families spend a great deal of time creating trust terms but very little time considering the role of trustee. They agonize over terms governing timing of distributions and control over principal, and then name the same person both to act as guardian for minor children and to administer these detailed terms as trustee.
In many cases a corporate trustee is better suited than a family member or close friend to carry out your wishes over the long-term. Professional trustees understand the tax consequences of their actions and know how to balance the often-conflicting interests of current and future beneficiaries. Traditionally this happened at big banks with trust department. Today, independent trustees specialize in the role and collaborate with us as the advisor, enabling continuity around long-term asset management across generations.
A corporate trustee should be considered as a backup in all cases. We’ve seen competent family members named as trustees who back out from the role due to unforeseen circumstances like caring for their own parents.
For the primary role, hiring a corporate trustee is a tradeoff. We introduce a trustee fee in exchange for the assurance that the document will be followed. This can help avoid asset depletion from spendthrift beneficiaries, poor tax planning, and even challenges by future beneficiaries.
If your trust plan is to allow an adult child to manage their portion of your estate separately, with full access to principal, a corporate trustee is likely unnecessary. However, as complications to this plan are layered on and competing interests between beneficiaries are created, a corporate trustee can provide value well beyond the fees they receive.
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