This week I will be in Chicago to present at the 2018 FOX Trustees and Beneficiaries Workshop. While I am there, I will be reviewing various options for choosing the most appropriate trustee for your family’s circumstances.
That makes this week a perfect time for the next post in our series about options available when selecting your trustee.
As discussed in our previous post, it is natural to want to choose a family member or someone you know well to serve as your trustee. However, it sometimes also makes sense to choose a professional trustee like a bank or trust company as the trustee or co-trustee.
The Pros of Using an Institution to Be Your Trustee
Selecting an institution to serve as your trustee may help you avoid some of the problems that can occur when a family member, friend or business associate is selected as a trustee, because institutional trustees:
- Have the skills and experience, along with the resources and systems, to effectively administer the trust in accordance with the settlor’s wishes.
- Can be objective and impartial and won’t have conflicts of interest that family members might have.
- Can more easily say “no” to requests that should be declined.
- Continue in business for decades so the family will not have to choose a successor down the road when an individual trustee dies or becomes incapacitated.
- Have insurance to cover a mistake, so it can be easier to recover damages for ineffective management or mismanagement of the trust assets.
Sound Perfect? Consider the Drawbacks to Using an Institution as Your Trustee.
Keep in mind that an institution has procedures and processes they follow, so recognize that:
- Institutions are not always fast-moving machines and decision-making can take time.
- They may be more conservative than your family would like.
- In addition to being conservative, some institutional trustees are uncomfortable with holding concentrated positions in family-controlled enterprises and in private equity investments.
- Trust officers will be less familiar than others might be with your family’s circumstances and values.
Institutions also have some disadvantages you might not face with other trustee choices:
- Trust officers sometimes move to other positions within their organizations or to entirely different institutions and their replacements will need to be “re-educated” about the family and each trust when turnover occurs.
- Institutions might be acquired and the character of the institution may evolve and result in a different institution acting as your trustee than the one you selected.
Still Have Questions About Your Trustee Choice?
Selecting your trustee is one of the most important decisions you and your family members will make, and with some thoughtful consideration, you can choose the trustee that best meets your family’s needs. For assistance in considering the pros and cons of each trustee option as it relates to your particular situation, please contact Mark Harder, Chair of our Private Client and Family Office Practice.
More information is available in our previous post: "Should I Choose a Family Member to Be My Trustee?
Additional information can also be found in our full article: "Who Can I Trust to Be My Trustee?