Considering a Corporate Trustee?

“Corporate trustee” usually refers to a trust company or the trust department of a bank or credit union. Its employees can help you build, manage and protect your wealth when you put your assets in a revocable living trust.

When you set up a revocable living trust, you need to name someone as the trustee to manage the assets your trust controls. Most people select themselves as the initial trustee, and designate who should be the successor trustee, to take over in case of incapacity or death.  While you can choose any adult, there may be reasons personal to you why you should consider a corporate or institutional trustee. 

A corporate trustee has full responsibility for managing your trust assets according to your instructions.  This would be an excellent choice if you are getting on in years and have no one you trust to take care of your financial affairs. You may be widowed, have no children or other trusted relatives living nearby, or suffer from continuing health problems.  You may have a child with special needs, and you want to assure that the needs will be met if you are unable to do so.  One of your beneficiaries may have difficulty handling money, and would benefit from professional management.  There may be conflicts among a set of beneficiaries, making it unwise to name one as the successor trustee. 

You may decide to create an irrevocable trust, such as a charitable or life insurance trust, with the intention of saving federal estate tax by removing assets from your estate.  In most cases you should not serve as the trustee to avoid the perception that you have continued control over the assets, resulting in them being included in your taxable estate.  A corporate trustee is a natural choice to make sure your irrevocable trust is administered properly.

During your lifetime, you may decide to have a corporate trustee serve as co-trustee with you, or turn over the work of managing the trust assets to the institution.  You may have better investment results with a corporate trustee who spends all of its time managing trust assets.  A corporate trustee will analyze your financial goals, risk tolerance and long-term objectives, and recommend the best investment strategy for you. Generally, a corporate trustee’s fee is a small percentage of the value of the trust assets, and it is in the institution’s interest to maximize the return on your investment portfolio.   

Institutional trustees can be superior to individual successor trustees in that they are regulated by both federal and state financial watchdogs, are held to a higher standard of performance by courts, and are always available.  If your personal trust officer goes on vacation or dies, there’s the rest of the institution prepared to take over.  Even if a bank or trust company fails, trust assets are safe. By law, trust assets must be kept separate from all other assets. They cannot be loaned, comingled with the institution’s assets or used to satisfy its creditors. You are also protected against fraud, theft, or administration errors.

A corporate trustee can also step in as successor trustee in case of incapacity or after your death, to follow the instructions in your trust.  It can buy and sell assets, pay bills, file tax returns, maintain accurate records, and distribute income and assets. Many people like the idea of having a professional take care of the paperwork, tax filings and other final details, and by selecting a corporate trustee, you are making the choice of who will handle those details, relieving friends and family from the burden. 

The fees that corporate trustees change are very reasonable in comparison to paying myriad other professionals to manage various aspects of your estate.  Designating a corporate trustee could potentially replace the tax accountant, estate planning attorney, probate attorney, investment professional, brokerage house, etc. Most people are unfamiliar with the many benefits a corporate trustee can offer them and their families.

Corporate trustees must objectively follow the instructions for the trusts they manage.  Some trust beneficiaries, such as those who expect to receive their inheritance all at once rather than parceled out according to the terms of the trust, regard them as uncooperative.  That may be your desire!  If you are concerned that a corporate trustee may be too impersonal, it is possible to designate a friend of family member as co-trustee with the corporate entity.  

To evaluate a corporate trustee, select two or three that are in business in your area.  Your bank or credit union may have a trust department, Take time to schedule a personal meeting with a trust officer, at the institution’s office.  For discussion during the meeting: how long the trust department has been in business; how many trusts it manages; minimum and average size of trusts under management and how much experience trust officers have in the trust business.  They should give you a copy of the fee schedule which is published.  Keep in mind that you will not pay a fee until the trust company begins to act as trustee of your trust.  

Law Office of Eileen Guerin Swicker 20 W. Market St. Suite 20 Leesburg, Va 20176 Tel: 571-918-0616 Fax: 703-459-9620