When creating a trust, there are two basic choices for a trustee: (1) an individual; or (2) a corporate entity. In our last article, we addressed the individual trustee and factors to consider when choosing an individual trustee. In this article, we review factors to consider when choosing a corporate trustee.
There are three basic types of corporate trustees:
(1) Bank Trust Departments. The bank trust department is the traditional full service corporate trustee with fee schedules for their services as trustee.
(2) Brokerage Firm Trust Departments. Most major national brokerage firms have in-house trust departments that combine the continued relationship with the family’s selected broker with the professional fiduciary personnel of the brokerage firm’s trust department.
(3) Private Regulated Trust Companies. Private regulated trust companies are incorporated to help people manage their money. These private trust companies are fully regulated by either federal or state bank regulatory agencies.
Corporate trustees are appealing to many because they provide the following:
(1) Experience. A corporate trustee knows how to manage a trust and how to deal with difficult and unusual situations.
(2) Investment expertise. A corporate trustee is in the business of providing investment expertise.
(3) Tight government regulation. All bank trust departments are regulated by both internal and governmental auditors.
(4) Unbiased approach. A corporate trustee is not a beneficiary and does not have that inherent conflict of interest; this may help maintain family harmony and bring a consensus into a family unit with otherwise differing views, since it is not a party to the family problems.
(5) Permanent existence. A corporate trustee does not die. It may therefore be a good choice when a trust is planned to continue for many years.
A corporate trustee brings professionalism and a staff that knows the responsibilities (and liabilities) of being a trustee. This professionalism comes at a price. It can be expected that most corporate trustees charge a fee of approximately 1% to 1.5% per year on the value of the assets under management, and additional fees may apply depending on the services rendered. However, the fees associated with utilizing a corporate trustee can be comparatively inexpensive if utilization of the corporate trustee prevents family discord and avoids litigation.
JensenBayles, LLP provides a broad spectrum of legal services. Thomas J. Bayles has been actively providing advice in the areas of trusts, wills, probate and tax planning in the St. George market for over 18 years. Please visit our web site www.jensenbayles.com or call 435-674-9718 and ask for Thomas J. Bayles. The information in this article is for educational purposes only and is not intended to be construed as legal advice. Please contact an attorney for legal advice specific to your situation.