Can I Name a Corporate Trustee in My Estate Plan?

When creating your trust documents, one of the most critical decisions is selecting a trustee to manage your trust assets. While many individuals opt for close friends or family members, others may wonder: Can I name a corporate trustee in my estate plan? Here’s what you need to know.

What Is a Corporate Trustee?

A corporate trustee is a department at a bank or other investment company that administers and manages trusts professionally. Unlike an individual trustee, a corporate trustee operates as a business entity with fiduciary duties to the trust’s beneficiaries. 

A trustee is responsible for investing assets, distributing funds, filing tax returns, and ensuring compliance with trust terms and applicable laws.

Benefits of Naming a Corporate Trustee

Here are some potential benefits to naming a corporate trustee in your estate plan:

1. Expertise and Experience: Corporate trustees have extensive knowledge of trust administration, tax laws, and investment management, helping to maximize the benefits of your trust. 
2. Objectivity: Unlike a family member who may have emotional biases, a corporate trustee makes impartial decisions based on the trust’s terms and the beneficiaries’ best interests.
3. Continuity and Stability: An individual trustee may become incapacitated, pass away, or resign, potentially disrupting trust management. A corporate trustee provides ongoing administration without interruption.
4. Regulatory Oversight: Corporate trustees are subject to regulatory supervision, adding an extra layer of accountability and protection for trust assets.

Potential Drawbacks 

Corporate trustees are not without potential downsides. Here are a few:

1. Cost: Corporate trustees typically take fees equal to .5% – 2% annually of the trust’s assets, which may be higher than an individual trustee’s fees. Typically, a personal trustee would be entitled to take an annual trustee’s fee of around 1% of the trust’s assets. Higher trustee fees may incentivize them to increase the income of the trust (and therefore their pay). However, the higher cost could yield fewer overall assets for the trust beneficiaries.
2. Less Personalized Service: Unlike a family member or friend, a corporate trustee may not have an intimate understanding of family dynamics or beneficiary needs.
3. Potential for Bureaucracy: Decision-making can sometimes take longer with a corporate trustee due to internal policies and procedures within financial institutions.

Is a Corporate Trustee Right for You?

Choosing a trustee depends on the complexity of your estate, family dynamics, and the level of professional management your trust requires. If your estate is large, involves complex assets, or if you anticipate family disputes, a corporate trustee can provide the necessary structure and impartiality. However, if your priorities are maintaining a personal touch in trust administration and keeping costs down, you may prefer an individual trustee.

Alternatives to Consider

If you want to combine the personal touch of a personal trustee with the expertise of a corporate trustee, a professional fiduciary may be a suitable alternative to consider. A professional fiduciary is a person who is paid to act in a position of trust on behalf of another person. Click here for a full explanation of why and how to choose a professional fiduciary. 

Always consult an experienced estate planning attorney for help analyzing your options and deciding on the optimal trustee for your personal circumstances. If you have questions about naming a successor trustee of a trust, feel free to contact our law firm.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.