Choosing a Trustee: What Can You Do If A Family Member Isn’t An Option?

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Frontier realizes that one of the most important aspects of estate planning is designating a trustee or executor for your estate. Your trustee will be responsible for managing the financial affairs of your estate after you die.

Trustees generally assume a wide range of estate management responsibilities, including distributing assets according to the terms of your last will and testament and any trusts you might have established. Other trustee responsibilities may include such tasks as managing trust assets on behalf of your beneficiaries and paying any outstanding taxes or bills that might be due.

Family vs. Corporate Trustee

Many people choose to name a sibling or close family member as their trustee because this individual knows them well and will be in the best position to make sure their wishes are executed faithfully. But what happens if you don’t have a living close family member, or one who is capable of fulfilling the sometimes difficult and complex duties of a trustee?

In this situation, your best option might be to designate a corporate trustee. This is usually a bank trust department or trust company that provides professional estate settlement and investment management services in exchange for a fee. Designating a corporate trustee often makes the most sense for couples and individuals who have large and complex estates and trust arrangements.

Aside from gaining valuable experience and expertise in estate settlement and investment management, designating a corporate trustee also removes the potential for difficult family dynamics to further complicate the fulfillment of an individual trustee’s duties. A corporate trustee is an objective outsider who will not be influenced by the emotions that can sometimes make fulfilling trustee duties difficult for close family members.

Other Potential Benefits

There are other potential benefits to naming a corporate trustee when there is not a sibling or close family member available to assume this responsibility:

  • Corporate trustees are subject to strict state and federal regulations, including rules regarding fiduciary duties.
  • Corporate trustees offer a wide range of professional services, including financial, investment and tax advice.
  • Corporate trustees may be able to generate higher investment returns on trust assets.
  • Corporate trustees usually have an extensive network of other estate and financial professionals they can tap as needed, including attorneys, CPAs and insurance professionals.

Another option is to name a corporate trustee and an individual — such as a close friend or business partner or associate — as co-trustees who would work together in settling your estate. In this scenario, the co-trustees would divide estate settlement responsibilities in whatever way makes the most sense.

For example, the corporate trustee might assume the role of directed trustee, handling the day-to-day duties involved in trust administration. The individual trustee, meanwhile, could assume responsibility for investment management if he or she has this capability, or hire a fee-based investment advisor to do so if not. The individual trustee could also handle routine tasks like paying outstanding bills or taxes that are due.

How Much Does It Cost?

Of course, there is a cost to using a corporate trustee. This will vary depending on the size and complexity of the estate, but it typically ranges from 1% to 2.5% per year. But if you don’t have a sibling, close family member or friend or business associate who is capable of or willing to serve as your trustee, then designating a corporate trustee or co-trustee may be your only viable option.

If you have more questions about choosing a trustee, please give us a call. We can discuss your situation with you in more detail and help you make a reasonable and informed choice.

 


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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