Reasons to Appoint An Independent Corporate Trustee
July 30, 2020 | By Tracy Shar, CPA, CFP®
A trustee serves a very important role: to make sure that the grantor’s wishes are carried out in accordance with the trust provisions. There are advantages to appointing an independent corporate trustee over a family member or friend. Here are a few key benefits.
IMPARTIALITY It can be difficult and stressful for a family member or friend to be impartial when dealing with beneficiaries. A corporate trustee can remain objective. This is especially important for complex family dynamics. In today’s world there are a lot of blended families and it may be difficult for an involved individual to remain unbiased.
EXPERTISE An individual trustee may not have the time, expertise or resources to administer the trust and may have to delegate to other professionals. A trust company has resources and expertise to handle the administrative responsibilities required for a trust. They would manage trust distributions, trust accounting and tax returns, and prepare trust statements. Special needs or elder care trusts are particular examples where a corporate trustee’s expertise is important.
CONTINUITY Often a client’s primary trustee will be his or her spouse, sibling, parent or peer. As we get older, it becomes more important to have a contingent trustee who will be ageless. That role is often more easily filled using a corporate trustee. A corporate trustee provides continuity throughout the life of the trust. Your beneficiaries do not have to worry about accessing their money or having other services disrupted.
INDEPENDENCE A corporate trustee could be an independent trust company. On the other hand, there are corporate trustees who are not independent. The general distinction is that an independent trustee will leave the investment management to your advisor, a fiduciary whom you know and trust. In contrast, a non-independent corporate trustee, such as a large banking institution, strongly encourages using its investment department to manage your money. An institutional trustee can be impersonal, inflexible and may be slow to respond to requests such as for a discretionary distribution.
We believe you would be well served by an independent trustee that will become a member of your team, continuing to act in collaboration with your other professionals, and letting your financial advisor provide independent investment recommendations and personal service to you and your family.
A trustee plays a very important role and choosing one is a very personal decision. We recommend that you review all the facts before making your choice.