Choose trustees with care

The answer often involves thoughtful, creative use of trusts – legal arrangements concerning ownership, management and disposition of property or assets – which are frequently the cornerstones of estate plans.

The most common trust is a legal document that saves time and taxes and allows you to control your assets, even in the event of incapacitation and death.

Determining how your trust will be designed and administered reflects your philosophy and long-term wishes. Equally important is selecting a trustee who assures that your trust’s provisions will be carried out fairly and consistently, however long the trust’s term, which can span generations. The trustee holds title to, assumes legal responsibility of, manages, and distributes the trust assets according to instructions established in the trust document.

Individual trustee advantages

Individuals are frequently selected as trustees. During your lifetime, you might serve as your own trustee. Other possible choices include your spouse, your child, a relative, a friend or a professional adviser. Among the advantages of having an individual act as your trustee are:

• Personal knowledge;

• Greater ability to influence those to whom distributions are given;

• Awareness of changing circumstances over time; and

• May possibly be less expensive costs.

Individual trustee disadvantages

Among the disadvantages of having an individual trustee are:

• Lack of investment experience, and oversight by regulatory agencies;

• Possible strains on family relationships or friendships;

• Perception that beneficiaries may influence the decision maker;

• May lack the time or expertise to properly manage the trust, increasing costs and the need for outside experts;

• May lack systems or expertise to properly account for assets, transactions and distributions and generate statements to beneficiaries; and

• Beneficiaries may outlive the trustee.

Due to such disadvantages, estate planning needs are often best met by a corporate trustee: a chartered, regulated, legally empowered corporation, typically a trust company or bank trust department. A corporate trustee provides professional, independent, objective trust administration and management. A corporate fiduciary can navigate the often murky waters of trust management and estate settlement, bringing technical knowledge, tax planning expertise, and continuity of service across generations.

Corporate trustee advantages

The advantages of a corporate trustee include:

• In-house experience and expertise in tax, law and investing;

• Objectivity, continuity and lack of bias in decisions;

• Assurance of compliance with instructions and agreements through government regulation;

• Systems and resources to administer complex issues;

• Ability to reduce and control the expenses of trust management;

• Disciplined investment process;

• Reliable and professional service with high standards of performance;

• Sources of experience, advice and referrals; and

• You gain control and assurance of management during incapacity and after death.

As you consider your choices, view your situation objectively. If you have a modest estate and your trust is fairly simple, you may be fine as your own trustee. A capable family member may be available to step in when you can no longer manage your trust yourself.

However, if your estate is larger, has a variety of assets, includes tax planning, or if you doubt your relatives’ capabilities or intentions, you should consider a corporate trustee.

Could your trust include minors as beneficiaries? Do any of your beneficiaries have challenges with money management? Do others have the ability to influence the decisions of an individual trustee? Are there children from multiple marriages? Do any beneficiaries have special needs? Are there challenging relationships, assets or family situations that need to be considered?

Depending on the answers to these and other questions, it may be that only a corporate trustee can meet your requirements.

Evaluating corporate trustees

How can you evaluate a corporate trustee? Talk to several. Visit them if possible. Ask about the structure of the company or department. Find out how many and the minimum and average sizes of the trusts they manage. How much experience do their people have with trusts? How do they deliver services?

Compare investment returns, fees and services. Ask for samples of statements or reports to see how easy they are to understand. Do they seem to care about you and your family? Do they listen and understand your concerns? Can you understand them? How comfortable are you that they will be there for you and your family when you need them?

After working a lifetime to provide for your family and create a legacy, it’s foolish to risk jeopardizing your estate and the well-being of your beneficiaries. Choose a trustee who will treat both your estate and your beneficiaries with skill and care. Give thoughtful consideration to making the right choice for your family. It can have a lasting impact on current and future generations.

Choose wisely.

Tim Parrish is vice president of trust and investment planning with Trust Company of the Ozarks. He can be reached at tparrish@trustcompanyozarks.com.