Today’s high net worth families are not willing to settle for an advisor who will simply manage their investment portfolios or give them a template for a financial plan. Instead, today’s high net worth families are looking for an all-in-one solution that offers them tax advice, asset allocation and active investment management, estate planning, philanthropy, wealth transfers to future generations and more. Is a corporate trustee right for you?
Introduction to the Corporate Trustee
Whether you already have a trust or are in the process of setting one up, it’s important to select the right trustee to oversee it. A trust can last for years, so you’ll need a trustee with the time and interest—as well as your complete confidence—to carry out the long-term obligations.
Selecting an individual or an entity who can serve your family when you are no longer capable is of upmost importance in estate planning. An individual can run a trust and serve as trustee, but the complexity and fiduciary burden make it quite difficult – even unwise – for an individual to do so. As a result, a third party should be identified to serve as a trustee.
The trustee is the person or corporate entity that manages the trust’s affairs in order to ensure that it achieves the goals set by its creators. This is a fiduciary role, and as such the penalties for failure are clear-cut and severe. Many otherwise financially sophisticated people can be bogged down by trust administration issues, deadlines and procedures. Given the complexity of the task, this will often be a specialized corporate entity, a trust company or a bank trust department.
A trustee’s responsibilities typically include:
- Distributing trust assets as directed in the trust document
- Performing principal and income accounting
- Preparing and filing tax forms
- Addressing specific beneficiary issues
- Investing the trust assets for the benefit of all interested parties
- Managing the assets tax-efficiently
- Having a thorough understanding of the applicable and ever-changing fiduciary and tax laws
You could take care of all this yourself or appoint a family member to do it. But the responsibility for such tasks—and the risks of mishandling them—is a lot to ask of anyone, let alone a favorite uncle or close friend. That’s why many people who establish a trust choose a corporate trustee.
Is a corporate trustee right for me?
Appointing a corporate trustee makes sense if you don’t have the time, desire, or investment experience to manage your trust, and you doubt that a friend and/or a family member does either. Corporate trustees have the fiduciary experience necessary to make sure your trust is administered according to its terms. They can bring the objectivity, continuity, and tax efficiency you want for your beneficiaries. And corporate trustees won’t abdicate because of illness, death, or divorce; nor will they take a vacation, move away, or be sidetracked by personal issues.
Here are the six main reasons why a corporate trustee is often a wise decision:
- Experience: Corporate trustees typically have a great deal of experience in the administration and investment management of trusts and are usually more efficient and knowledgeable in trust matters than non-professional individuals.
- Regulation: A corporate fiduciary is subject to many levels of oversight from internal auditors, outside auditors, and government regulators. This is all for the protection of the trust beneficiaries.
- Reliable Professional Service: Corporate trust officers are assigned by the corporate fiduciary from a full staff of competent professionals to oversee and administer an account. There is depth of administration with a corporate fiduciary that is not present with an individual. If an individual gets sick or dies, there may not be continuity of administration. This is not a concern with a corporate fiduciary.
- Objectivity: The corporate fiduciary is bound by the terms of the document and will administer the trust as it is written. Sometimes individual trustees have a tendency to favor one class of beneficiaries over another or to be subject to pressure from one class. While a corporate fiduciary may be subject to pressure, there is no personal benefit from favoring one over the other.
- Peace of Mind: Beneficiaries can have peace of mind when dealing with a corporate fiduciary instead of worrying if the trustee is making the right decisions.
- Family Politics: Parents will often name an oldest child as the trustee of their trusts. Often the trustee is faced with difficult choices that are not always popular with the beneficiaries of a trust. When this involves family members, the named child is put in a situation that can cause conflict among the children. A corporate fiduciary does not face the personal issues among the family members that any of the children would face. This allows the trustee to make the best possible decision, preserving harmony within the family.
Apex partners with National Advisors Trust Company to offer the highest caliber of trust services in all 50 States. Please contact our team at Apex to learn more about our private trust services.