By Lee Sherman
Who is the best person to look after your estate once you’re gone? Should you choose a family member, your lawyer, or a corporate trustee? While you might initially have more confidence in a family member or someone who is already familiar with both your finances and your family dynamic, there are many reasons to go the corporate route. Chief among them is the fact that a corporate trustee is better positioned to settle any familial disputes that may emerge over how the money is spent.
While you may trust your lawyer, they aren’t necessarily the best choice either. Unlike your lawyer, most corporate trustees are fiduciaries which means they are legally bound to act in the best interests of your estate and remain an impartial advocate for the trust as a whole, not any individual beneficiary. Corporate trustees are typically authorized by the state or federal government to provide professional fiduciary services and are subject to oversight. Okay, so once you’ve decided to turn things over to the professionals, what’s the next move?
Given that you are entrusting your estate to a corporate entity, you’ll want to ensure that they are going to take the time to understand your personal financial situation and whatever goals you may have put in place for the trust. These goals could be broad, such as establishing growth targets or they can be very specific such as only investing in a fund that tracks the S&P 500 or investing a certain percentage of your trust’s portfolio in emerging economies. On the other hand, you may be more concerned with preserving the wealth you have or with philanthropy (even going so far as to name a specific charity).
If your trust is small, you may not have a dedicated local trust administrator. And even if you do, over the course of a lifetime or more, your trust will be administered by different individuals. That may sound concerning but in fact this is actually one of the big advantages to a corporate trustee. It means that the goals are enshrined in the larger fiduciary organization, rather than an individual who may not work there next year or worse, a family member, who may themselves pass. The more detailed your financial plan, the more likely your wishes will still be honored.
Get what you pay for
You’ll need to understand the fee structure. Corporate trustees perform administrative and investment services that go far beyond what you can expect from your cousin as a trustee and, for all but the smallest family trust, they are more than worth it. That said, you want to make sure that the fees are both reasonable and transparent. For these fees, which are typically between 1.0% to 1.5% of trust assets charged annually, the trust will receive monthly statements and written explanations for trust decisions. Should the trust be audited or there be legal challenges, the corporate trustee can represent the trust in court and act as an advocate for your goals.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.