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When should you designated a corporate trustee to be the trustee of a trust you are creating?

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When someone goes through the process of establishing a trust, they must designate a trustee. All trusts have a trustee or cotrustees.

This post does not address who you should name as the trustee of your revocable living trust, particularly when the primary function of that trustee will be simply to disburse trust principal to the principal beneficiaries after the death of the Settor or Settlors. This video address the possibility of designating a corporate trustee when you are giving or leaving a significant sum of money to a trust, and that trust will be in effect for years, decades, or even generations.

Examples of these types of trust include:

(1) Leaving $1 million to a trust for a child;
(2) Leaving $500,000 to each grandchild, in trust; and
(3) Leaving your entire estate in trust for many years to come.

The following are four reasons why people select corporate trustees when they are establishing a trust and making their trustee designation.

(1) Expertise. Corporate trustees, in general, have the experience and knowledge necessary to stay abreast of the economic and tax environment;

(2) Objectivity. Trustees are often given the discretion to give or use principal to a beneficiary for their health, education, maintenance, and support. A family member or individual may not be able to match the objectivity of a corporate trustee.

(3) Investment Experience. Corporate trustees will develop an investment strategy that will consider the present and future needs of the trust beneficiaries.

(4) Accountings. Trustees are required to prepare and deliver timely accountings to the beneficiaries. Corporate trustees are often better suited to prepare and deliver these required accountings.

In my 30 years of advising Settlors of trusts, I've found that the public is often reluctant to designate a corporate trustee, primarily for two reasons:

(1) Unfamiliarity. Most of the public has never dealt with a corporate trustee. Heck, many people don't even know that corporate trust departments exist.

(2) Fear of excessive trustee fees. The generation of folks that are establishing these trusts for their children, grandchildren, and greatgrandchildren are, in general, frugal. They do their math and they calculate what the corporate trustee compensation may be based on the value of the trust principal, and it makes their stomachs turn. Whether they should have this fear, however, is another posting. But the fear exists among consumers who are in a position to make these decisions.

Check out my other post where I make the case for the individual trustee.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 3292450