Revocable Living Trusts have become a widely used estate planning document, providing a path to managing assets, avoiding probate, and gaining privacy at the settlement of an estate. When you work with your legal counsel to establish a Revocable Living Trust, you will usually name yourself as trustee and manage your financial assets as you have previously. It is necessary to name a successor trustee, to act in the event of your incapacity or death. Selecting the right trustee is one of the most important decisions you will make.
Careful attention should be paid when choosing someone to serve in this often complicated and difficult role. Family members may lack the experience, ability, and time required to perform the duties of a trustee. Individuals often have personal relationships with beneficiaries that may cause conflict within the family. While you can choose almost any adult, including family members or friends, consider a corporate or professional trustee as the possible optimal solution.
Corporate trustees give their full-time attention to the trust assets. They have experience, resources, access to tax, legal, and investment knowledge that may be difficult for an individual to duplicate. A corporate trustee can be engaged as the administrative trustee only, allowing them to focus on the operation of the trust, while engaging your registered investment advisor to manage the investment assets. Alternatively, the corporate trustee can be engaged as both administrative trustee and investment manager. Flexible trust language may allow beneficiaries and co-trustees to continue working with your current registered investment advisor or, permit them to identify a registered investment advisory firm of their choice.
Regulation and Protection
Regulated by both state and federal agencies, corporate trustees provide safety and security of your assets. If a trust company fails, by law trust assets must be kept separate from all other assets, they cannot be comingled with the trustee’s assets and cannot be used to meet the claims of the trustee’s creditors. Corporate trustees and registered investment advisors are both held to the fiduciary standard of acting solely in the best interests of trust beneficiaries. They must be objective in following your instructions. Broad powers in the trust language will also provide beneficiaries with the authority to remove and replace trustees.
If you choose to name personal trustees, most trust documents will name a Corporate Trustee as a successor, in the event none of the personal trustees are available, capable, or willing to serve. Simply stated, corporate trustees are institutions that do not become incapacitated or die. Consider the type of assets that you own including investment securities, farmland, and commercial real estate when selecting the most qualified corporate trustee to manage them.
Many estate owners can benefit from the advantages of a corporate trustee. Consult with your attorney when establishing or amending a Revocable Living Trust, regarding naming the appropriate corporate trustee, and the advisability of including provisions for your registered investment advisor to manage assets for your trust.
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Kevin Kingston, CLU, is managing director and financial adviser at Savant Wealth Management; savantwealth.com
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