With people living longer and healthcare costs continuing to rise, our savings must grow larger and last longer. Deciding where to put your money in an uncertain market with so many investment options to choose from can be confusing and making a wrong decision can be costly.
One option you should not overlook is the bedrock of asset management and personal service — the corporate trustee.
What is a corporate trustee?
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. A trust is simply a legal document that lets you reduce unnecessary legal fees, save taxes and keep control over your assets while you are living, if you become physically or mentally incapacitated, and after you die.
When you set up a trust, you need to name someone (a trustee) to manage the assets your trust controls. While you can choose just about any adult, there are very good reasons why you should consider a corporate trustee.
When would I use a corporate trustee?
If you set up an irrevocable trust (like a charitable or life insurance trust), or you plan to make gifts in trust — strategies often used to save estate taxes by removing assets now from your taxable estate — you will probably need to name someone other than yourself as trustee for tax reasons. A corporate trustee is a natural choice to make sure your irrevocable trust is administered properly.
If you set up a revocable living trust — to avoid probate when you die and prevent court control of your assets at incapacity — you can be your own trustee. Even so, there are many benefits to having a corporate trustee involved. They can assist you in several ways:
1. As trustee
As trustee, a corporate trustee has full responsibility for managing your trust assets according to your instructions. This would be an excellent choice if you are elderly and have no one you can rely on to take care of your financial affairs. You may be widowed, have no children or other trusted relatives living nearby (or don’t want to burden them), or you and your spouse may be in declining health.
Even if you are capable of managing your own trust, a corporate trustee can be a wise choice. You may not have the time, desire or investment experience to manage your trust yourself. Or perhaps you just feel that someone with more time and experience could do a better job than you.
2. As co-trustee
If you want to take advantage of a corporate trustee’s investment experience but still be involved, you could have one work with you as co-trustee. 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.
It would also let you see how they would perform in your absence, let you evaluate their investment performance and service, and let you see how comfortable you feel with them overall — a kind of “trustee test drive.”
3. As investment agent
You could also name a corporate trustee as agent. While a co-trustee has equal responsibility with you (usually both signatures are required to transact business), an agent can have as much responsibility as you wish.
You can have an agent manage only a portion of your trust’s assets (your stocks and bonds, for example) or just provide you with investment advice, with you making all final investment decisions.
4. As successor trustee
If you decide to be your own trustee (for example, of your revocable living trust), consider naming a corporate trustee as your successor trustee. In this capacity, they will step in and manage your trust for you when you can no longer act due to incapacity or death. Many people like the idea of having a professional take care of the paperwork, tax filings and other final details.
Couldn’t I name a relative or friend instead?
You could, but keep in mind that family and friends are not always a good choice to be involved with your trust.
They may be too busy with their own affairs, may reside in a distant area, may not get along with other family members, or may not be responsible or experienced enough to manage the trust assets. An innocent error by a well-meaning but inexperienced relative or friend could negate your careful planning and cost your beneficiaries thousands of dollars.
One option is having a relative (perhaps one or more of your adult children) and a corporate trustee work together. This would give you the professional experience and objectivity of a corporate trustee along with the personal involvement of someone who knows you.
What are the benefits of using a trust?
Avoids probate at death, including multiple probates if you own property in other states
Prevents court control of assets at incapacity
Brings all of your assets together under one plan
Provides maximum privacy
Quicker distribution of assets to beneficiaries
Assets can remain in trust until you want beneficiaries to inherit
Can reduce or eliminate estate taxes
Inexpensive, and easy to set up and maintain
Can be changed or cancelled at any time
Difficult to contest
Prevents court control of minors’ inheritances
Can protect dependents with special needs
Prevents unintentional disinheriting and other problems of joint ownership
What are the benefits of using a corporate trustee?
Peace of mind
Stability of working with a company versus just an individual
Takes the burden off of family members