A trustee may serve for years—or even decades. Understanding the responsibilities involved can help families determine whether an individual or corporate trustee is best suited to carry out their long-term wishes.
A well-designed estate plan is essential to helping protect your family and the legacy you wish to leave behind. While an estate plan does not need to be overly complex, some individuals may want greater control over how their assets are managed and distributed after their passing. In these situations, a trust can be incorporated into an estate plan to help carry out your wishes and create a lasting legacy for future generations.
The responsibility for maintaining the integrity of a trust belongs to the named trustee. A trustee is the individual or entity charged with the fiduciary responsibility of managing the trust according to the terms and intentions outlined in the trust document. Unlike the role of an executor, which is generally limited to settling an estate over a relatively short period of time, a trustee may serve in this capacity for many years — or even decades.
Understanding the responsibilities, time commitment, and potential complexities involved may help determine whether appointing a corporate trustee could provide greater continuity, objectivity, and professional oversight in administering the trust over time.
Understanding the Trustee’s Role
01 Distributions from the Trust
The purpose of the trust can be to help supplement the needs of the beneficiaries. Most trusts require distributions to be made annually. However, it’s common for trusts to allow for additional distributions to beneficiaries for health, education, maintenance and support. The language surrounding these provisions can be broad and subject to interpretation. The trustee must determine what is reasonable and appropriate and convey those decisions to the beneficiary.
02 Management of Assets
As a fiduciary, a trustee is responsible for the prudent management of assets held in trust. That can include selecting professional managers to manage the assets on the trustee’s behalf.
03 Administration and Taxes
In addition to the duties above, other administrative responsibilities may include paying bills, maintaining records and filing tax returns.
04 Fiduciary Role
The trustee is required to act in the best interests of the beneficiaries and follow the terms of the trust. If they fail to do so, they can be removed with cause and be held personally liable. The decisions made by a trustee may have a lasting impact on both future generations and family relationships.
The Benefits of a Corporate Trustee
Longevity and Experience:
A corporate trustee may provide greater continuity and stability in the administration of a trust. Naming an individual trustee can create the risk that the person may become unable or unwilling to serve when needed due to age, health, relocation, family circumstances, or other life events. A corporate trustee is designed to provide ongoing administration, professional oversight, and institutional continuity throughout the lifetime of the trust.
Impartiality of Decisions:
A professional trustee has the experience to make reasonable decisions based on the provisions of the trust. This can help remove emotion from decisions regarding distribution requests from family members
A Long-Term Decision
When creating estate planning documents, the complexity and long-term responsibilities of serving as a trustee can sometimes be overlooked or underestimated. Acting as a trustee requires ongoing time, administrative oversight, financial responsibility, and the ability to navigate sensitive family dynamics.
For this reason, individuals may want to carefully evaluate whether appointing a corporate trustee is appropriate for their situation. A corporate trustee can provide professional administration, continuity, experience, and objective decision-making designed to help carry out the long-term intentions of the trust.
