Possibly one of the most important decisions you make concerning your trust is who will serve as your trustee. The trustee has a duty to comply with the terms of your trust. These duties include distributions of income and principal, making prudent investment decisions, managing real property and exercising discretionary authority. While it is common for parents to name a child or trusted friend, there are other choices, such corporate trustees. The benefits of a corporate trustee should not be overlooked.
Why should I choose a corporate trustee?
A corporate trustee is a highly trained professional that can offer experience, stability, objectivity, and confidentiality. Most are insured and bonded. Also, many corporate trustees belong to a team of professionals from various disciplines that can assist and advise the corporate trustee on issues that might arise concerning the administration of your trust.
The trustee you select will be responsible for the financial well-being of the trust estate. This includes investment of trust assets. Your trustee must feel comfortable making investment decisions or choosing and supervising an investment manager, weighing and evaluating requests for distributions, which sometimes means making hard decisions. If your trustee is a relative or friend they may not possess the investment know-how or backbone to say no to a beneficiary's request for a distribution.
Your trustee must also be capable of maintaining adequate records, including accounting for the receipt and disbursement of income and principal from the trust. The trustee must also prepare and file all tax returns to the appropriate taxing authorities. A corporate trustee will keep abreast of the ever-changing tax laws and trust reporting and administration standards.
A primary purposes of stablishing a trust is to prepare for the future. So, it is important to remember that, over time, age or illness could potentially prevent your trustee from performing his or her duties. Although a successor trustee could also be named in your trust agreement, having the stability and continuity that a corporate trustee will provide, may be a preferred option.
The reality is, even in the perfect family, relationships can sometimes become strained. While your trust might be carefully written to explain your intentions and provide clear instructions, it may be difficult for a child or friend to avoid disputes and act objectively. With a corporate trustee, on the other hand, an objective third person will make decisions free from bias or influence from family or friends.
Estate planning is inherently a delicate topic. Family relationships, financial status and other private matters are commonly involved. For most clients confidentiality is very important. The temptation of a trustee that is a relative or friend to discuss your private affairs may be too great. Inadvertent disclosures are also common with inexperienced trustees. You can be sure that a corporate trustee with keep your private matters confidential.
If you have questions regarding corporate trustees, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.