Why Use a Corporate Trustee?

It’s natural to worry about your family and the legacy you’ll leave them. Estate planning — the process of thinking ahead and formally outlining your wishes — can help ensure that your loved ones are taken care of when you’re no longer available to help them.

Trusts can form an important part of an estate plan, allowing you (the trustor) to set up a strategy for how your assets will be passed along to your beneficiaries after your death. And, no, you need not have a big bank account in order to use a trust. In fact, many families use them for a variety of reasons ranging from leaving money for a grandchild’s college education to providing for a loved one’s ongoing health care.

Who will your trustee be?

Determining who your trustee (the manager of your trust) should be is a key part of estate planning. Who will manage your assets and act on your behalf? Who will oversee the investments, pay bills, distribute income and proceeds, file tax returns and properly handle the business of your trust?

According to Members Trust Company, which offers trust and estate planning services to credit union members (including RBFCU), serving as a trustee to manage a trust requires a considerable commitment of time:

“Depending on the type of assets, trustees may have to spend substantial time processing requests, mediating, and making final decisions about distributions. With career, family and community responsibilities, it can be difficult for individual trustees to quickly respond to time-sensitive, beneficiary requests.”¹

And there is the issue of liability: Trustees are liable, personally, for their actions as well as their inactions in regards to the trusts they manage. Trustors who ask a family member or friend to become their trustee aren’t always aware of this fact. Thus, well-intentioned people sometimes accept responsibility for a loved one’s estate understanding neither the full scope of their duties nor the possible legal and personal ramifications of a misstep.

What a corporate trustee brings to the table

While a family member or close friend could serve as your trustee, a corporate trustee — like RBFCU Trust Services — is another option to consider. With a professional entity (such as a financial institution) taking on the responsibility of managing a trust, the name “corporate” refers to the business relationship between the trustor and the trustee. A professional trust officer serves as the primary point person for all relevant parties.

There can be real value in this arrangement. Simply put, a corporate trustee offers a level of support and experience that most family members and friends cannot provide.

Additional reasons to consider a corporate trustee include:

• Strategic planning: Estate planning is essentially a means of pulling together professionals with the experience and integrity to advise you on how to best structure your assets to create a trust that meets your goals. With this plan in place, your trustee manages and distributes your assets as you wish.
• Professional guidance: There are many types of trusts available to manage your estate. Revocable living trusts, testamentary trusts, irrevocable trusts, special needs trusts and charitable trusts each address a different need. A corporate trustee can work with your financial advisor, your attorney and your accountant to offer comprehensive advice on successfully creating and maintaining the right trust — or even multiple trusts — to meet your goals.
• Impartiality: Family dynamics can bring challenges that a corporate trustee may better navigate than a relative. With their experience and knowledge, professional trust officers are better prepared to help resolve issues between beneficiaries (current and future) in ways that satisfy the law and your wishes.
• Specialized knowledge: The size of an estate or specific assets within a trust may present complex financial and legal issues. Laws governing the investments of trust assets must be followed, and some estates may have issues or assets that require additional care. A corporate trustee has the experience to address any legal needs and work to increase investment return.
• Permanence and availability: Many trusts are expected to last a decade or more. Should your original trust officer retire or leave their position, another staff member will be in place to carry out your wishes. Corporate trustees, in other words, offer continuity.
• Resource network: Although a corporate trustee may not draft legal documents (e.g., wills, powers of attorney or trusts), they often can provide a referral to a legal firm. They may also be able to refer you to financial advisors, CPAs and others. Having a united team to assist you moving forward can streamline your estate planning processes.

The cost of a corporate trustee vs. an individual trustee

Many people assume that it's cost effective to have a family member serve as a trustee. However, that is often not the case. Individual trustees, who may not charge a fee, will still need to pay for the professional services of attorneys, accountants, and others to help them manage and settle a trust. These “hidden” costs can add up.

It’s also important to remember the old adage, “You get what you pay for.” Corporate trustees do charge a fee that is usually a percentage of the overall value of the trust. But the specialized expertise they provide, along with their continuity of care, impartiality and their professional network, can be well worth the expense. Sparing your loved ones the immense responsibility for managing your trust during their time of grief can be a wonderful gift, too.

The takeaway

Whatever the size of your estate or what your planning needs might be, a corporate trustee can help ensure your assets are handled according to your wishes while minimizing burdens on your beneficiaries, giving you — and them — peace of mind.

210-637-4117 | trustservices@rbfcu.org | rbfcu.org/trustservices

RBFCU Trust Services is a division of RBFCU Investments Group LLC. RBFCU Investments Group LLC is a wholly-owned subsidiary of RBFCU Services LLC. RBFCU Services LLC is affiliated with Randolph-Brooks Federal Credit Union (RBFCU). Trust services available through Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency.

Trust and Investment products are not federally insured, are not obligations of or guaranteed by the credit union or any affiliated entity and involve investment risks, including the possible loss of principal.

This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.

SOURCES:

¹Polany, T. (2022) How to choose a trustee: 4 key considerations, Members Trust Company. Available at: https://memberstrust.com/how-to-choose-a-trustee-four-key-considerations (Accessed: April 26, 2023).