A Corporate Trustee Could Be a Smart Choice
Trust administration is more difficult than many families presume.
In an ideal world, managing a family trust would be simple. There would be no stress, no big learning curve, and no great time commitment involved. Unfortunately, the world is not ideal, and heirs who become trustees are often left with headaches.
“Sure,” a named trustee may think, “I can follow the rules, pay the taxes, and make sure this asset goes to this person or organization. I am confident I can deal with any issues.”
But what if the trust includes income-producing real estate, intellectual property created with collaborators, or a large investment portfolio? A trustee can quickly lose confidence when trying to understand these assets, let alone the tax and legal issues linked to them. Additionally, the greater the complexity of the estate, the wider the door opens for family arguments about the way trust assets are being handled.
Keep in mind that this article is for informational purposes only. It is not a replacement for real-life advice, so make sure to consult a financial professional before modifying your trust strategy.
Corporate trustees bring objectivity, knowledge, and rigor to trust administration. As they are either trust companies or bank trust departments, they are regulated by state and federal agencies. They are held to a fiduciary standard: They have to act in the client’s best interest.[1,2]
Many of the professionals working for corporate trustees are knowledgeable about multiple kinds of assets and the strategies used to administer them. Plus, they are resources; if you need more knowledge about a matter, they may have it or be able to connect you with someone who does.[1]
While an heir essentially takes on a part-time job in becoming a trustee, the professionals employed by corporate trustees make trust administration their career. As they are outside your family, they are not at risk of letting your family’s history or tensions influence their work.
How much does corporate trust administration cost? The annual fee commonly ranges between 0.25% and 2.00% of the trust assets. Your family may feel that professional trust management is worth this expense. A corporate trustee may even be named as a successor trustee in the event that no financially responsible trust beneficiaries remain.[2]
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations
1 - EstatePlanning.com, July 29, 2020
2 - Investopedia, April 26, 2020
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country's leading professional association of fee-only financial advisors.