Choosing A Trustee: Individual Trustee vs. Bank or Corporate Trustee

Importance of a Power of Attorney

The Dangers of the Wrong Trustee Selections

 
Choosing a trustee is critical in the process of creating any type of trust. A trustee accepts a large responsibility by agreeing to serve as a trustee and their duties may go on for many years or even a lifetime.  The trustee is named in the trust document (either under a will or in a living trust). The trustee's duties include managing assets and making decisions under the terms of the trust.

Choosing a trustee can be a difficult decision. Should the trustee be a family member, friend, lawyer, financial institution, or even a non-profit organization? How many trustees should you have one, two, or more? After you have chosen a trustee you will also want to choose an alternative trustee in case the original person or entity is unable or unwilling to act as trustee. Deciding on who would be the best trustee for your trust depends on factors such as what type of trust it is, the amount of assets in the trust, the purpose (s) of the trust, how long the trust will last, and who are the beneficiaries of the trust?

Here are some advantages and disadvantages of an Individual Trustee verse a Corporate Trustee:

Individual Trustee

 
Advantages Disadvantages
Possibly Less expensive
 

May lack knowledge of trusts, investments, and  trust record keeping rules  
 Many people assume a family member  or friend will serve without  compensation but this may not be true May need to spend out of trust for professional  help where a bank or trust company may need  fewer professional assistance
 Personal knowledge of your Unique  situation and the situations and needs of  the beneficiaries  Lack of experience in making investment and  distribution decisions
 Are only working for the beneficiaries  and not multiple clients  Lack a team of experts and experience in trust  management and investment
 Interest in beneficiaries well being  Can be influenced by others even the beneficiary

Could cause disputes with family or friends 
 Related parties know your desires  Being a related party trustee might cause  inclusion for tax purposes and undercut creditor  protection
   
   
   

Corporate Trustee (such as a Bank or Trust Company)

 
Advantages Disadvantages
 Experience and Expertise with trusts and  investments, accounting, record keeping  and trust laws  May be more expensive than an individual  

Not available nights and weekends like  individual may be
 Unbiased, knowledgable decision making  May not understand the beneficiary needs (often a memorandum by you will help)
 

A reliable trustee is critical to the trusts success. Spend some time creating your own list of advantages and disadvantages and seek professional help to pick the best trustee for you and your trust or trusts.
David M. Frees, III
Attorney, Speaker and Author