Posted by: The Life and Legacy Planning Group
In its simplest terms, a trust is a legal arrangement in which a trustee holds and manages assets for the benefit of one or more beneficiaries. The trustee owns the assets, enters into contracts on behalf of the trust, manages the trust’s investments as its trustee, and follows the trust’s instructions on making distributions. A trustee can be a single person, multiple people, or an institutional or corporate trustee.
Duties of a Trustee
The duties of a trustee are many, as a trustee owes a fiduciary duty to the beneficiaries of the trust. Some of these duties include acting in good faith, exercising reasonable care in the administration of the trust assets, keeping proper books and records for the trust, carrying out the trust terms as laid out in the trust document, avoiding any conflicts of interest, and not personally benefiting from his or her position as a trustee, except as provided by the trust document or under applicable law.
Benefits of Corporate Trustees
When you have a corporate trustee, as opposed to an individual trustee, the company is a trustee. The benefits of a corporate trustee include impartiality and professional judgment – unlike individual trustees who may be subject to family politics or favoritism. Moreover, managing trusts is the corporate trustee’s primary duty – as opposed to an individual trustee who can often have other personal, family, and career responsibilities that will serve as a constant distraction. Corporate trustees are in the business of acting in that capacity, so they know what filings are required, how to handle tax issues, how to deal with an incapacitated beneficiary, how to navigate the highly complex area of special needs and governmental benefits, and generally understand the intricacies of a trustee’s duties. Corporate trustees will likely have better recordkeeping habits which can be helpful in the case of audits from the IRS or state tax agency. Finally, a corporate trustee, because it is a company, lives forever and cannot become incapacitated like a person. As a result, the succession of trustee authority is typically more predictable and smooth.
When you decide to set up a trust as part of your estate plan, know that you can do so with an individual or a corporate trustee. Each has its own advantages. If you need assistance in understanding this process, and choosing the right type of trustee for your particular situation, contact us today.