One of the most important decisions you’ll make when designing your estate plan is who to name in the various fiduciary roles: trustee, personal representative, executor and agent. While a critical decision, it’s often given significantly less thought than the distribution of your assets. But even a meticulously designed estate plan drafted by an accomplished estate planning attorney can fail to achieve its purpose if the trustee fails to administer the trust properly.
Not wanting to upset the family hierarchy, many parents name their first-born child as the first fiduciary appointed in their estate planning documents, followed by the second-born child and so on. Depending on the provisions of the trust, this type of arrangement could create a situation where the oldest child has complete discretion over whether to make distributions to their siblings. This can lead to unwanted family conflicts, even for those families whose siblings are extremely close – which is why it’s important to have a good understanding of trustee duties, different types of trustees and trust services offered.
Typical Trustee Duties
In addition to the potential family conflicts inherent in naming a child to serve as trustee, it’s also important to consider the duties your trustee may need to perform. The trustee’s responsibilities go beyond what most individuals expect or are prepared for. In many ways, it is like a full-time job.
Depending on the complexity, a trustee might be required to perform the following tasks:
- Accounting and administrative duties, such as paying bills, retitling assets and bookkeeping
- Asset management, including reviewing investment performance, maintaining records, tracking investments and collecting dividends and other income
- Maintenance and transfer of real estate, including obtaining titles, deeds and appraisals
- Management, valuation and disposal of business interests held in the trust
- Valuation and distribution of personal property
- Management of unique assets, such as farm or ranch holdings, copyrights, patent rights, and oil and gas interests
- Estate settlement, including preparing tax returns and paying creditors
- Distribution of assets according to the trust terms
Corporate Trustee v. Individual Trustee
As you can see, serving as a trustee is a serious and potentially time-consuming obligation. Not only that, an individual trustee can expose themselves to significant personal liability for failing to administer the trust properly.
Many people find that appointing a corporate trustee can relieve the burden of asking an individual to take on additional liability and perform the duties required of a trustee. Unlike most individuals, a corporate trustee typically has extensive trust administration experience, is knowledgeable of the applicable state laws and procedures, and can serve as a neutral third-party administrator.
You should consider appointing a corporate trustee if you expect any of the following situations may arise with your estate plan:
- Long-term or ongoing trust administration
- Complex, multi-generational trust administration
- Family conflicts or potentially difficult family dynamics
- Economic disparity among beneficiaries
- Dissimilar provisions for beneficiaries in the same generation
- Spendthrift protection provisions
- Trusts for surviving spouses in blended family situations
- Special or supplemental needs trusts (SNTs)
Learn More About Trust Solutions
To learn more about our corporate trustee solutions and how we work with you to help protect your estate planning legacy, please reach out to us today.
Scott is a Non-registered associate of Cetera Advisor Networks LLC, Member FINRA/SIPC
Opinions expressed by the owner of the attached content does not reflect an endorsement by the named broker dealer or its affiliates.
