There may be a natural tendency to name a family member or other individual to serve as trustee or personal representative (executor) of an estate. They often have knowledge of the family, may have personal relationships with the beneficiaries, and may understand their needs well. Unfortunately, family member or individual trustees may not have the experience, time, and fiduciary expertise to manage the increasingly complicated world of trust administration: tax, investment, administrative duties required of a trustee, a myriad of laws to comply with, etc.
Here are some reasons it might be better to appoint a professional corporate trustee:
• A corporate trustee is free of family history, conflict and dynamics. It must remain independent and unbiased in carrying out its legal fiduciary duty and fulfilling the intended purposes of the trust.
• Family member trustees may have serious conflicts of interest – such as serving as trustee while being a trust beneficiary.
• Serving as trustee can be a burdensome responsibility for a family member. Corporate trustees are geared up to serve as trustee because that is their business.
• Serving as trustee is a legally demanding job. Often, the family member trustee does not have a working knowledge of numerous trust and estate laws that must be complied with. Corporate trustees are trained in these matters. Some of these laws include: Trust Code, Probate Code, Prudent Investor Act, Principal and Income Act, Transfers to minors Act, and other laws.
• Corporate trustees have the experience and knowledge to serve as fiduciary in an efficient and cost effective manner.
• Regulatory oversight is an important safeguard that governs how a corporate trustee operates. This is not the case for family member or individual trustees.
• Here’s a quick comparison of the advantages of an individual or family member vs. corporate trustee.
Some additional thoughts
• For some families, appointing a family member or other person as Co-Trustee, “Trust Advisor” or Trust Protector may be a good alternative.
• Make sure your trust document has a workable provision for the beneficiaries to remove a trustee if the fiduciary relationship becomes unworkable or conflicted.
• We are pleased to send you a copy of the American College of Trust and Estate Counsel’s whitepaper entitled “What it Means to Be a Trustee: A guide to Clients”. Click here to request a copy.