In my last article I discussed some of the factors to consider when choosing a trustee for your irrevocable trust. Now I’d like to elaborate on two options you might want to consider if you don’t know anyone you’d trust to fill this crucial role: a corporate trustee and a private trustee.
A corporate trustee is a bank or specialized company that manages a trust in the best interests of the grantor (the person whose assets are in the trust).
A private trustee is a local attorney who acts as trustee.
Advantages of these approaches include:
A corporate or private trustee is unbiased. This will help eliminate infighting between family members over who should serve as trustee and how the trust should be managed.
Experience. A corporate or private trustee will generally have far more experience managing and administering trusts than a family member or close friend.
Finally, if you are unhappy about how trust assets are being managed, it is considerably easier to fire a corporate or private trustee than, for example, your son or daughter.
If it sounds like a corporate or private trustee might be a good option in your situation, be sure to ask potential candidates all of the following questions:
- What does the service cost and what is included in the fee?
- How long has the trustee been in business?
- How many trusts has the trustee managed?
- How many assets are held in trusts typically managed by the trustee?
Differences between corporate and private trustees:
An array of services. Many corporate trustees provide additional financial services beyond trust administration. Taking advantage of these services might be a sound investment. A private trustee will limit services to managing the trust.
Cost. A private trustee is generally less expensive than investment houses that charge on a percentage basis.
Cash minimums. All corporate trustees have required cash minimums in order to serve as trustee (the amount varies widely by bank). A private trustee does not have a minimum.
Real estate. Only a few corporate trustees will take on real estate. A private trustee often will.
Oversight and backup. Corporate trustees are subject to a host of strict regulations and oversight. Also, being part of a larger office, your corporate trustee will always have another staff member to take over your trust if needed. A private trustee also has regulations and backup, but to a much lesser extent.
As always, I am here to help you any and every way I can. I also welcome the opportunity to counsel you on your choice of trustee.
Until next time, take care…
Alexis