Why a Corporate Trustee May Be Right for You (or “How to Save Thanksgiving Dinner”)
May 16, 2023
By: Lauren K. Drury, Esq.
Vice President and Chief Fiduciary Officer
Washington Trust Wealth Management
Setting up a trust (or multiple trusts) is an important part of your estate planning strategy. In the drafting process, a lot of attention is focused on making sure the document accurately describes your wishes (e.g., who gets what). Unfortunately, a lot less time and attention is focused on who will carry out those wishes. Many people choose friends, family members, or their children to serve as individual fiduciaries because they believe no one else cares as much to do the right thing, and that may be true. But being a fiduciary is complicated and can be a burden for your loved ones. Often, giving one of your loved ones financial control over others may create (or worsen) conflict among family members. A corporate trustee offers advantages that can benefit your legacy – and may just save your family (and Thanksgiving).
The Gift of Not Being a Fiduciary
A trustee’s role begins when emotions are raw – usually either during your incapacity or immediately following your passing. An individual trustee is often left handling final affairs, estate tax matters, and initial trust distributions…all while grieving the loss of a loved one. This initial phase of trusteeship can lead to feelings of frustration and animosity among family members: “Why isn’t this happening faster” or “That’s not what Mom would have wanted” become familiar phrases. From that initial standpoint, the responsibility grows, as do the feelings of criticism and accusations while your individual trustee prepares the family home for sale, makes the initial investment decisions of the assets, and begins to prepare budgets for their siblings, nieces, nephews and the like, all while having their own jobs and caring for their own families. Being a trustee is a full-time job and often one your friend, brother, or child is not prepared for and may grow to resent. Naming a corporate trustee to work with your family – as a sole or a co-trustee – takes that pressure off your loved ones and gives them the space to grieve and be there for one another as a family.
A corporate trustee is a professional, competent fiduciary who is bound by law to act in accordance with your trust terms and in the best interests of your trust beneficiaries. Though a friend or family member is bound by these same duties, they may have emotional attachments or conflicts of interest that unintentionally cloud their decision-making abilities. This is not just about, or even primarily about, conflicted relationships. It is not easy to put on your fiduciary hat and say no to someone that you love! Appointing a corporate trustee ensures that your assets are managed and distributed in an objective and unbiased manner, without the pressure and influence of family dynamics. As much as people don’t think it will ever happen to them, we see it all too often – otherwise happy families destroyed by disputes over one family member exercising financial control over another. A corporate trustee helps maintain family unity by taking responsibility for all asset management and distributions – taking on the role of “the bad guy” so your loved ones don’t have to bear that burden.
Consistency and continuity
Continuity in decision making and administration creates consistency, which provides peace of mind for your loved ones. A corporate trustee ensures that a trust is managed and administered consistently, whether that be through your incapacity, during the administration of your estate, or over your beneficiaries’ lifetimes, regardless of changes in family circumstances or relationships. Naming a corporate trustee in your trust document is crucial to avoiding putting remaining family members in the painful position of trying to repeatedly replace individual trustees as they become incapacitated or die. There is flexibility in choosing a corporate trustee, as it is not an irreversible decision, giving you the power to remove or replace at any time.
A common myth is that choosing a family member as trustee is free and/or cheaper than a corporate trustee. In reality, a family member likely will not have the necessary expertise to navigate the complexities of asset management and trust administration, requiring the services of tax preparers, lawyers, wealth managers, and others to ensure that the trust is managed effectively. A corporate trustee can manage all these services for a reasonable fee, often at a lower cost than what a family member would have to pay for the same services. This can make a significant difference in the long-term value of the trust. Corporate Trustees also maintain fiduciary insurance, something individual trustees often overlook until it is too late.
Professional, cautious, and conservative management of assets
A corporate trustee has the expertise and resources to manage a wide range of assets, from stocks and bonds to real estate and businesses, and to act with prudence and care when making investment decisions. They can also provide valuable guidance on estate planning and tax strategies, ensuring that your assets are managed in a way that minimizes risk and maximizes returns, ensuring that the terms of the trust are followed accurately and efficiently.
Washington Trust Can Help
Washington Trust Wealth Management corporate trustee services give you and your family peace of mind, with our experienced managers providing expert, compassionate, and independent oversight of your trust assets. We take an active, holistic, and comprehensive approach to all aspects of your legacy, readily navigating the complexities of trust management and balancing the competing interests of beneficiaries. We faithfully carry out your wishes, handle the tough questions, and make difficult decisions consistently and responsibly. From distributing and investing trust assets to maintaining records to complying with state and federal regulations, we are here to preserve, protect, and oversee your legacy for generations to come.
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This material is presented for informational purposes, and nothing herein constitutes legal, accounting, or tax advice. Please consult with an attorney or tax professional regarding your specific financial, legal or tax situation.
The views expressed here are those of Washington Trust Wealth Management and are subject to change based on market and other conditions. Investment recommendations and opinions expressed in these reports may change without prior notice. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.