January 17, 2014   Trusts

How Do I Evaluate a Corporate Trustee?

By Vickie Schumacher
A corporate trustee is a bank trust department or trust company. Its employees can help you build, manage and protect your wealth when you put your assets in a trust.
There are several benefits of having a corporate trustee involved with your trust.
  • Experience. Managing trusts is their business. They are familiar with all kinds of trusts, tax and estate planning strategies, and the legal responsibilities of a trustee.
  • Professional asset management. Generally, a professional who has more time, resources and experience can achieve better results than an individual.
  • Regulation. They are regulated by both state and federal agencies. Also, most courts consider them to be experts and expect a higher degree of performance than from an individual.
  • Reliability. They won’t become ill or die, go on vacation, move away or be distracted by personal concerns or emotions as an individual might.
  • Objectivity. They will follow your trust instructions objectively and unemotionally. A family member may find this difficult to do, especially if he or she is a beneficiary of your trust.
Corporate trustees are not all the same, however. They have different personalities, fees, investment performance and services. For example, some do not manage real estate or settle estates. Most have minimum requirements on the amount of trust assets they will accept.
If you are considering a corporate trustee, talk to several, in person if you can. Ask how long they have been in business, how many trusts they manage, the minimum and average size of trusts they manage, and how much experience their people have in the trust business. Ask to see samples of statements you would receive.
Compare investment returns, fees and services. Most have reasonable fees, especially when compared to what you would pay others for estate and tax planning advice, for investment management, for preparing tax returns and for investment trading commissions. Typically, a corporate trustee will provide all these services and more for only a small percentage of the value of the assets they manage for you. And because their compensation is based on how much those assets are worth, instead of on how many trades they make for you, they are motivated to help your assets grow.
Finally, how do you feel about the people there? Do they seem to genuinely care about you and your family? Do they listen to you? Do they understand your concerns? Can you understand what they are saying or do they talk only in technical terms? Do they want your business? Overall, how comfortable do you feel that they will be there for you and your family when you need them?
You can start by having them manage only a portion of your trust assets and see how they do. Developing a working relationship with a corporate trustee now lets them become familiar with your objectives, your trust and your beneficiaries’ needs and personalities while you are around and able to provide guidance and input—and lets you see how they would perform in your absence. With most trusts, if you become unhappy with their performance, you or your beneficiaries can change the trustee at any time.
Vickie Schumacher is the author of the best-selling book, “Understanding Living Trusts.®” The sixth edition is currently in production.
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