RSM Resources

If you have accumulated significant wealth, chances are you already have a trust or are looking to establish one. If so, you may have named or are looking to name a family member or close personal friend as trustee.

What is a trustee?
A trustee is a person (or institution) selected to administer a trust. One of the primary roles of a trustee is to adhere to the terms of the trust document and fulfill its objectives. A trustee can be an individual (professional or nonprofessional) or a corporate trustee, such as a bank or trust company.

A trustee is responsible for administering the trust document and assisting in the fulfillment of the trust’s objectives.

A trust may survive for at least one generation and may extend beyond two or three. This may have a significant impact on your choice of trustee or on your decision to appoint co-trustees or successor trustees. You must also weigh and consider many other personal, family, business, investment and non-tax factors. For example, does your candidate possess the necessary investment, accounting and tax planning expertise? Does he or she know the beneficiaries and will he or she be sensitive to their changing needs?

Why name a corporate trustee instead of an individual?
While there may appear to be strong rationale for choosing a relative to be a trustee, hiring an independent corporate trustee may be the wiser decision.

A corporate trustee brings objectivity, experience and expertise at a time that is often wrought with emotion. This influence is especially helpful in an unfriendly familial situation. A corporate trustee will remain neutral in the face of family disagreements. That is why trust and estate professionals frequently recommend hiring corporate trustees, rather than naming family members.

Avoiding fees is frequently the primary reason in naming a family member or friend as trustee. Paradoxically, individual trustees must often hire other professionals to assist them in carrying out their obligations as trustee which may eliminate any expected cost savings. Naming a corporate trustee could very well provide you with much greater value than the fee charged. Some advantages of using a corporate trustee over individual trustees include:

• Accountability – Record keeping systems exist to en-sure timely, accurate accounting of principal and income as well as production of regular statements.
• Collective thinking – More fully informed opinions can be voiced and decisions made by knowledgeable and experienced professionals.
• Confidentiality – Privacy is maintained and matters are treated with the utmost confidence.
• Experience – Knowledgeable, experienced professionals are well versed in complex trust management.
• Focus – Attention and resources are dedicated to the needs of grantor, beneficiaries and other interested parties.
• Impartiality – Decisions are made objectively in an unbiased atmosphere.
• Permanence – Perpetual existence assures a capable, professional organization is ready to complete the trust tasks required for decades going forward. Corporate trustees always have a backup; they don’t become ill or die. Additionally, a company’s circumstances, such as a merger, will not affect a corporate trustee for fulfilling its fiduciary obligation.
• Regulation – Corporate trustees are subject to standards set by state or federal regulatory agencies, including maintenance of defined levels of capital and insurance. 
• Value – Specialization in trust administration provides services in an efficient, cost-effective manner.

The choice of trustee is a very significant decision and should be considered carefully, as this may have long-term consequences. Be sure your selection will ensure the original intent of the trust is fulfilled.

Note: The foregoing is provided as an overview and discussion of some of the attributes which may be available by using a trust and should not be used as a substitute for legal advice. Due to the complexity of estate and wealth planning issues, a qualified financial planning, tax and/or le-gal professional should be consulted before making any decision regarding estate and wealth planning.

Mike Flinn is senior vice president of business development at AST Capital Trust and works with RSM McGladrey. For more information or to get in touch with Mike Flinn, contact Robert Eichten at robert.eichten@rsmi.com.