What trustee type is best for your client’s estate? Learn about the pros and cons of giving fiduciary responsibility to one type of trustee over others.
An integral, essential part of any estate plan is the trust; a fiduciary agreement used to hold assets for one or more beneficiaries while also offering significant tax and other protective benefits. A trust enables the owner of an estate to put conditions on how and when assets are distributed after death, to reduce estate and gift taxes, and to distribute assets to heirs efficiently without the cost, delay, and publicity of probate court.
The conditions defined for this fiduciary agreement are described in a trust document, which is basically a contract between the estate owner (grantor), the heirs (beneficiaries) and a third party that plays an essential role in the management of the trust assets,known as the trustee.
The role of trustee as an entity with fiduciary responsibilities over trust assets has existed and evolved over hundreds of years. In the late 1200’s, the concept of a living trust emerged as men leaving England to fight in the Crusades re-titled their property in “trust” managed by a reliable individual should they not return home.*
In more recent times,the trustee experience for baby boomers and earlier generations most likely involved working with a ‘trust officer’ at a local bank branch, where trustee services were offered to banking clients. In this traditional bank-trust company model, the banks controlled it all; they custodied assets, administer trusts, and managed distributions….and those generations willingly accepted it.
But as the modern era of financial services began in the 1970s, some U.S. states ushered in new trust laws that allow for non-corporate trustees to have fiduciary responsibility of investments and/or distributions, resulting in the emergence of custodian-neutral, independent trust companies that partner with financial advisors.** Flexibility, choice, and control is the mantra of today’s investors, and the new independent corporate trustee model helps satisfy those demands.
Despite the history and evolution, the basic tenets of the trustee role still boils down to the two key responsibilities of distributing and managing the trust assets as defined in the trust document. And the types of trustees a client can elect to fulfill those duties still generally come down to a reliable individual, a large bank trust,or an independent corporate trustee.
So, what are the differences between these trustee types, and what are some advantages or disadvantages to giving the fiduciary responsibilities of trust assets to one type of trustee over the others?
Regardless of the type of trustee chosen to handle fiduciary responsibilities over trust assets in an estate plan, your clients are relying on you, their trusted financial advisor, for holistic financial planning advice that demonstrates you have the best interests of your clients and their family at heart.
To help you confidently nurture your client relationships, Trucendent is a technology solution and services partner that empowers you to manage the estate planning process and educate beneficiaries about a grantor’s wealth transfer requests.
And when you and your clients conclude that an independent corporate trustee is right for their estate plan needs, Trucendent helps you pair clients and beneficiaries with one of our professional corporate trustee partners that excel at trust administration and insist that you as the advisor are the best person to continue to manage the assets in the trust.
Cultivate relationships now using Trucendent. Grow your assets under management with an estate planning solution that helps you build trust with clients and maintain a relationship with the next generation.
*, ** An Advisor Road Map to the Corporate Trustee Industry–Past, Present, and Future, Investments & Wealth Institute, September 2018