The selection of a successor trustee is an important decision in designing a trust. It is important to consider all options and factors involved to make the best decision possible.
Key Takeaways:
- The selection of a successor trustee is an important decision in drafting a trust, as it will affect the beneficiaries for many years to come.
- Serving as trustee is a complex and time-consuming job.
- A corporate trustee should provide experience, objectivity, continuity and protection to your loved ones long-term.
- Corporate trustees should have the professional knowledge and expertise to manage the most complex legal issues, provide complete and organized administrative oversight, and marshal and protect assets.
The primary role of a trustee is to adhere to trust language while applying their expertise and discretion in the best interest of the beneficiaries. Most personal trusts are drafted to name an initial trustee, often the trust grantor, as well as a contingent or successor trustee. Typically, the successor trustee begins to serve as trustee at a triggering event or future date, such as the incapacity or death of the original trust grantor.
The selection of the successor trustee is a critical decision in designing a trust, as it will affect the lives of beneficiaries for many years to come.
While it may initially seem appealing to name a family member or friend as successor trustee, naming a corporate successor trustee may add more value. In today’s complex legal and financial environment, the role of a trustee can be burdensome. The duties involved and tasks of administration can be time consuming and demanding. Serving as trustee is a complex job that requires managing, maintaining and distributing the trust's assets for the benefit of all beneficiaries and in accordance with the governing law and the trust document. Even routine trust administration involves investing assets, detailed record keeping, distribution decisions, filing tax returns and more.
Here are four reasons to name a corporate successor trustee within your estate plan:
1. Experience
Corporate trustees should have deep collective experience to understand their fiduciary and legal responsibilities. Trustee responsibilities include adhering to governing law, applying the terms of the trust, investing and monitoring assets, maintaining detailed record keeping, filing tax returns and managing distributions for the benefit of all beneficiaries. This can also include navigating unique circumstances such as real-estate or family-business interests. This list of responsibilities is not exhaustive but helps illustrate why most families benefit from the experience of a corporate trustee. An individual trustee may lack the time, experience and skills necessary to manage the myriad of trust administration responsibilities, while a corporate trustee can devote its attention and resources to professionally achieving desired trust outcomes.
2. Objectivity and Harmony
A trustee’s fiduciary responsibility requires that they act in the best interest of the trust grantors and beneficiaries while adhering to the terms of the trust. This can be difficult for family members and friends to execute objectively. Corporate trustees help maintain family harmony by carrying this responsibility. For example, a beneficiary can request distributions that will invade the trust's assets. A corporate trustee can weigh this request impartially and remain neutral in the face of family disagreements. Additionally, they provide an impartial voice to resolve and minimize potential conflict. Experienced corporate trustees have the ability to execute this responsibility with the highest level of trust, loyalty and care available in the industry while insulating the beneficiaries from conflicts within their personal network.
Avoiding fees is often a reason cited for naming a family member or friend as trustee. In these cases, individual trustees typically hire other professionals to supplement their expertise to fulfill their obligations. This can minimize expected cost savings and creates a disjointed experience for the beneficiaries. Due to their expertise and professional distance from familial relationships, naming a corporate trustee often provides greater value and security over time.
3. Continuity
The role of a successor trustee may not commence for years, if not decades in the future, and the successor trustee may be required to serve for many years or decades beyond their original appointment. A corporate trustee typically has an endless lifespan, which can provide greater continuity and greater consistency throughout the trust’s existence. A corporate trustee is well positioned to stay abreast of changes over time in the economic environment and tax and estate laws that may impact the trust. Appointing a corporate successor trustee can help maximize trust assets over long periods of time and provide greater cohesion for the beneficiaries.
4. Protection
Corporate trustees are overseen and regulated by government agencies. Courts tend to view corporate trustees as experts, holding them to higher standards than individual trustees. Furthermore, financial and other sensitive information is protected-- privacy is maintained and matters are treated with confidence. A corporate trustee has the financial strength and resources to protect the interests of the beneficiaries long-term.
Relieving your family and friends of the trustee burden can provide greater peace of mind to all parties.
Conclusion
When choosing a successor trustee, it is important to consider all options and factors involved to make the best decision possible. For the above reasons, allowing an experienced corporate trustee to professionally handle your financial affairs can be invaluable. Contact your Comerica Relationship Manager or reach out to Comerica Wealth Management to help navigate the process of selecting and naming a successor trustee.
NOTE: IMPORTANT INFORMATION
Comerica Trust is a unit of Comerica Wealth Management which consists of various divisions and affiliates of Comerica Incorporated, including Comerica Bank, Comerica Bank & Trust, N.A. and Comerica Insurance Services, Inc. and its affiliated insurance agencies. Strategic alliance organizations of Comerica Bank & Trust, N.A. are neither subsidiaries nor affiliates of Comerica Incorporated or Comerica Bank & Trust, N.A. Securities and other non-deposit investment products are not insured by the FDIC; are not deposits or other obligations of or guaranteed by Comerica Bank or any of its affiliates; and are subject to investment risks, including possible loss of principal invested. Comerica and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation.
This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein have been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel.
The views expressed are those of the author at the time of writing and are subject to change without notice. We do not assume any liability for losses that may result from the reliance by any person upon any such information or opinions. This material has been distributed for general educational/informational purposes only and should not be considered as investment advice or a recommendation for any particular security, strategy or investment product, or as personalized investment advice.
