Many important decisions regarding the transfer of your wealth are made when working with an estate planning attorney. However, one of the most critical is often made with little or no regard for the consequences: this is the choice of a successor trustee for your trusts.

Using a Corporate Fiduciary

A corporate fiduciary can be appointed in lieu of assigning responsibilities over your trust to a family member or personal connection. Corporate fiduciaries have extensive knowledge and experience to navigate duties required of an estate and trust.

It is a given that, while you serve as your own trustee during your lifetime, little changes in the way you do business. You still continue to invest and spend your money as you desire. This situation drastically changes when a third-party assumes the duties of trustee after your resignation, incapacity or death. A fiduciary is charged with complying with a variety of laws that dictate how the trustee’s duties must be performed. These include the Duty to Account, Prudent Investor Law and the Uniform Principal and Income Law. Unless your child happens to be a professional fiduciary, chances are that he or she is going to need expert advice to administer your trust. This leads us to the first compelling reason for choosing a corporate fiduciary:

1. Experience

Corporate trust providers are in the business of administering trusts and estates. They have the necessary experience to effect the efficient, compliant administration of an estate or trust. Personal property inventory and auction, real estate appraisal and possible sale, preparation of required personal and fiduciary tax returns, investment management of assets, accounting to beneficiaries, and compliance with legal requirements can all be handled by professionals in the trust company. The average individual trustee would have to separately employ all of these people to achieve the same level of administration, thereby increasing the fees payable out of the estate or trust assets.

2. Unbiased Neutrality

Corporate fiduciaries are compelled by law to administer trusts according to applicable terms of the trust. This includes no bias for or against any beneficiary. By having a neutral trustee making discretionary distribution decisions, you can remove any familial pressures from the equation, ensuring that your wishes are carried out without regard to past interpersonal reactions. This also removes family pressures on the trustee to make or refrain from making a particular distribution. One way to keep the family history and personalities in place is to name a surviving spouse or other family member as co-trustee of the trust with the corporate fiduciary, the corporate trustee being solely responsible for discretionary distributions to the cotrustee family member.

3. Regulation and Oversight

When you name an individual trustee, no one oversees the administration of the trust. The only way the beneficiaries can correct administrative errors or abuses is to sue the trustee for breach of trust. An individual trustee’s personal assets may be subject to attachment after a judgment against them. Contrast that with a corporate trustee that is highly regulated. For example, Mariner’s estate planning and trust division is examined by the South Dakota Division of Banking. Internal auditors also scrutinize trust administration. Should an error be found, you have access to liability insurance to satisfy any judgment.

4. Sibling Rivalry

No matter how well your children get along during your lifetime, relationships can change after a death, particularly when one sibling is named as trustee to make financial decisions for other siblings. An even worse scenario is to name multiple children as co-trustees, then require that all decisions regarding trust administration be unanimous. In this scenario, the only way to break a deadlock among co-trustees is to obtain a court order.

5. Continuity

Naming an individual trustee always carries the risk that he or she will become incapacitated or die during the administration of the trust or estate. This risk can be avoided by naming a corporate fiduciary, which lasts in perpetuity. These are some things to consider when naming a successor trustee for your trusts or a personal representative for your estate. It is a decision that should be made only after careful consideration of the options available. For more information, please contact your wealth advisor.

This material is provided for informational and educational purposes only. It does not consider any individual or personal financial, legal, or tax circumstances. As such, the information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind. Where specific advice is necessary or appropriate, individuals should contact their professional tax, legal, and investment advisors or other professionals regarding their circumstances and needs.

Any opinions expressed herein are subject to change without notice. The information is deemed reliable, but we do not guarantee accuracy, timeliness, or completeness. It is provided “as is” without any express or implied warranties.

Mariner Trust Company (MTC) is an affiliate of Mariner. MTC is a state chartered public trust company organized under the laws of South Dakota and serves to provide its customers with administrative trust services and other related services. The services provided by MTC are separate from the registered investment advisory entities of Mariner and are subject to additional fees. Mariner does not provide legal advice.

Mariner is the marketing name for the financial services businesses of Mariner Wealth Advisors, LLC and its subsidiaries. Investment advisory services are provided through the brands Mariner Wealth, Mariner Independent, Mariner Institutional, Mariner Ultra, and Mariner Workplace, each of which is a business name of the registered investment advisory entities of Mariner. For additional information about each of the registered investment advisory entities of Mariner, including fees and services, please contact Mariner or refer to each entity’s Form ADV Part 2A, which is available on the Investment Adviser Public Disclosure website. Registration of an investment adviser does not imply a certain level of skill or training.