Whom Should You Name as Your Successor Trustee?
Taking care of your assets as they pass to the next generation is no small task. There is plenty to think about, and it's easy to make mistakes. One common and potentially costly mistake is to name a family member as successor trustee, the person or entity tapped to carry out the wishes of the grantor, the person who sets up a trust.
The role of successor trustee is enormously important because there is so much to take care of, the stakes can be high, and errors can be costly and create delays.
Nevertheless, all too often, inexperienced and unprepared family members are named to this highly critical role, because their loved one wanted the successor trustee to be someone known and trusted.
In contrast, there are many benefits to working with a corporate trustee. Read on to learn about the advantages a corporate trustee can offer:
1. Professional service
Given the variety of responsibilities involved in being a successor trustee, from administrative duties to legal concerns, and the need for familiarity with investments, insurance, taxation, estate planning and the overall welfare of the trust's grantor and its beneficiaries, having a professional in charge can be beneficial in many ways.
2. Fiduciary role
A corporate trustee will be much more adept at upholding a fiduciary standard -- and thereby avoiding the legal liabilities that would apply in the event that standard is not met -- compared with an individual layperson. It doesn't matter that a trustee is well intended and simply being negligent because of a lack of experience or qualifications. If the fiduciary standard is violated, the consequences will be the same.
3. All-in-one comprehensive service
Hiring a corporate trustee leaves all matters in the hands of a reliable organization that specializes in trusts. That corporation can provide a full range of services, from overseeing investments to valuing real estate and other assets to doing tax reporting and being custodian of the assets. With all of that comes efficiency and cost effectiveness.
"It's an all-encompassing role," says Carlee Harmonson, Fiduciary Management Executive and Managing Director, Union Bank. "When we are named as trustee, we assume investment and tax management because the two items are so closely linked. For example, if we're selling assets, we need to be able to look at the gains versus the losses and be tax efficient in the way we sell, offsetting gains with losses as appropriate so as to minimize tax liabilities.
"We value assets and business interests such as limited partnerships and LLCs, including those that hold real estate. If a family member were entrusted with that, they'd have to separately hire a valuation firm. All those things are wrapped in our services."
4. Capable of managing special situations
Trusts sometimes involve unusual or special circumstances. What if assets are unique and difficult to value, such as art, antiques or other collectibles, farm and ranch assets, timber, minerals, royalties, hedge funds or other complex assets? This is where professional asset management and risk management can be particularly relevant and valuable.
Other special situations can involve the beneficiaries rather than the trust assets. Many beneficiaries have special needs, such as mental health issues or drug addiction. These challenges are increasingly common and can require the experience, attention and resources of a corporate trustee to find the right solution.
5. Objective decision making
Using an impartial, external, third-party trustee, such as a corporate trustee, could avert potentially damaging and difficult emotional battles that could ensue in the event that a family member was to be selected as trustee. This could be an important safeguard and way to maintain a healthier family dynamic at an already challenging time as the beneficiaries deal with the loss of a loved one.
6. Extensive resources
The extensive resources of a corporate trustee encompass the collective experience and insights of staff who specialize in managing trusts, as well as the technological resources available to them. Also invaluable is their easy access to reliable external partners, specializing in a range of services, from accounting and business valuation to insurance and legal.
7. Long-term continuity
Continuity and the avoidance of disruption are of particular relevance in situations where trusts are set up for the ongoing needs of multigenerational beneficiaries, including the children and grandchildren of the grantor. A corporate trustee will reliably maintain consistent, dependable, professional, ongoing service indefinitely.
What to look for when choosing a corporate trustee
Brokerage and investment advisory services are available through UnionBanc Investment Services LLC, an SEC-registered broker-dealer, investment adviser, member FINRA/SIPC, and subsidiary of MUFG Union Bank, N.A. Insurance services are available through UnionBanc Insurance Services, a division of MUFG Union Bank, N.A. with a California domicile and principal place of business at 1201 Camino Del Mar, Suite 208, Del Mar, CA 92014. California State Insurance License No. 0817733. Non-deposit investment and insurance products: • Are NOT deposits or other obligations of, or guaranteed by, the Bank or any Bank affiliate • Are NOT insured by the FDIC or by any other federal government agency • Are subject to investment risks, including possible loss of the principal amount invested • Insurance and annuities are products of the insurance carriers.