PART 4 – I may not be comfortable with my children or friends serving as the successor trustee.
For a large estate, another possibility is to name an institution as the successor trustee.
An arguable benefit of utilizing a financial institution is being able to depend on its longevity and likely existence into the indefinite future. Trust companies can include large banks that have a dedicated trust department or companies like Morgan Stanley or Merrill Lynch to name a few. The bank or trust services company can do most of the paperwork, can keep an eye on things and approve all trust transactions.
Just think about anything that you have done multiple times. The first few times it may have taken you forever but after that you got better and more efficient at it. That’s how trust companies work as well. As an added benefit, should the trust company make a major mistake, they tend to have very deep pockets from which to collect reimbursement. Finally, they are a disinterested party (instead of a sibling or relative) which can be very beneficial when there is more than one beneficiary or the beneficiary is a minor.
Are there any negative aspects to consider before selecting a trust company? Of course they charge for their services, but you may be paying for this service anyway even if you select a child, friend of the family, or relative. No matter who you select, there could be a charge. Those with low base fees typically have higher transaction fees and those with high base fees, lower transaction fees. This makes it difficult to access the true cost. What about investment returns? There is no standard way for trust companies to quote their returns (unlike mutual funds) so it may be difficult to compare. Some have minimum requirements, meaning they will only accept responsibility for estates with relatively high levels of liquidity.
Are some trust companies better than others? Yes, but a company who is good today can be bad later. Therefore, it is important for any relevant estate documents to include a provision so that the management can be swapped to a different trust company if need be.
Stay tuned for our upcoming article which addresses the topic of Can I have multiple successor trustees serving together?
Larger estates belonging to an affluent family and/or successful business owner have additional concerns that we have experience addressing. If you fit this category a consultation with our firm could prove to be very beneficial. Call for a free consultation to learn more.