By Brenda K. Lowe, CPA, PFS
Naming a trustee to manage your estate can be a difficult decision. Many choose a family member, such as an adult child, a friend, or even a neighbor to assume the role. But naming a loved one as a trustee can cause complications over time. Not only is the role of trustee time-consuming but it can also be emotionally draining, especially if the beneficiaries prove contentious. And if a trustee lacks the financial knowledge and expertise needed to properly administer the estate, there may be tax consequences—or worse.
For these reasons, it’s never a bad idea to consider a corporate trustee, which could be a bank trust department or independent trust company.
Here are four benefits of using a corporate trustee:
- Prevent family issues.
Appointing a corporate trustee can help to prevent familial disagreements over your estate. When the beneficiaries aren’t in agreement with the actions of the trustee—even if said actions are in accordance with the grantor’s wishes—they may hold the trustee in contempt now or years later. If the trustee is a family member or loved one, it could lead to painful conflict, even in families where conflict was rarely an issue before.
- Protect your estate with the right expertise.
Trust officers have experience in performing these duties. Their expertise ranges from complex tax matters to wealth planning and preservation to even psychology. Furthermore, a corporate trustee follows a process for everything and has an investment committee that oversees all trust investments.
- Ensure continuity in the administration of your trust.
Unlike individual trustees, corporate trustees never die. This is especially important if your trust is created as a “dynasty” trust that will continue for years.
- Avoid placing an undue burden on a loved one.
Generally people do not realize the time and anguish serving as a trustee can bring. Often, individuals do not know what to do and when to act, and can quickly become overwhelmed. When this happens, tax deadlines may be missed or assets may be managed unwisely. Think about how time-consuming it is to keep up with your own financial affairs. Can you imagine managing someone else’s, all while keeping beneficiaries happy and adhering to your fiduciary duty?
Or, consider an abridged solution.
Sometimes it may make sense to use both an individual trustee and a corporate trustee. This “co-trustee” solution allows a loved one to be involved in the administration of the trust without being burdened by the full scope of the role’s demands.
Plan ahead to make the best decision for your estate.
Regardless of where you are in your estate planning, it’s important to understand the pros and cons of individual and corporate trustees as they relate to your situation. At JAK, we can help you weigh the benefits of each, so you can make the best decision for you and your family.