When I meet with families for the first time, identifying a corporate trustee within a revocable trust is always an unusual conversation.
Before describing why, lets quickly outline what it means to identify a third-party trustee that is unrelated to you and your family.
A corporate trustee is a business or entity (like a bank or wealth management company) that agrees to manage and administer a trust. As you might suspect, this agreement is based on paying a service fee. Generally, this is where people back away.
Really though, I like the idea of engaging an entity as a back-up to the back-up for one reason: just in case we all die. Here is what I mean.
Corporate Trustee: Everybody Dies
Like you, I do not like to think about my death. Taking this nightmare to the next level, I do not like the idea of thinking about dyeing in a car accident with my closest family matters (minus the one grandchild or child hanging out with a babysitter). Far fetched, but possible.
Anyways, I love the idea of making sure my trust has the power to implement Minnesota statute 501C.074, versus making a trustee or guardian seek authorization from a court to fill a trustee vacancy. I like this idea because I want my assets distributed amongst my beneficiaries versus court fees. Also, I cannot predict the far fetched future (North Korea?).
Even better than adding the Fancy in Trusteeship or Successor Appointment rule is helping out by selecting an entity to act as my corporate trustee.
Thus, updating a revocable trust to account for vacancies makes sense.
Corporate Trustee: Running from Fees
Of course, the one reason people balk at the idea of selecting a corporate trustee (even as a back-up to the back-up) is the fear of paying corporate fees. Certainly, I agree. If ATM fees make you go crazy, corporate trustee fees might make you sick.
On the other hand, family dynamics can be the deciding factor. Some realize their family is not sophisticated enough to manage a trust, while others are fearful of family members arguing over silly things.
The intentions of the settlor (the person who made the trust and identified a third party to manage it) is what matters most. In my experience, having a person with specialized knowledge to administer a trust can be a breath of fresh air.
Corporate Trustee: One of My Favorite Approaches
The value of thinking through the issue of selecting a corporate trustee is sometimes overwhelming. Although not for everybody, one of my favorite approaches is selecting a personal friend or family member as my trustee and making a corporate trustee their partner. In other words, both serving as co-trustees.
Personally, I think this accomplishes a handful of goals:
- Reduces fiduciary stress,
- My trustee can lean on an entity I pre-selected,
- And, if my trustee gets sick or is no longer able to help, they have a back-up too.
Just to be clear, a person wishing to create a revocable trust is not required to select or identify a corporate trustee. Instead, I only bring to your attention because it is a nice alternative for people concerned about selecting a trustee or not knowing enough trustworthy people to manage their affairs.