Do You Need A Corporate Trustee?

Family dynamics are fascinating. After more than thirty years in the investment management and financial planning industry, I’ve noticed most families are similar. There are patriarchs, matriarchs, do-gooders, black sheep, brilliant minds, athletes, know-it-alls, Republicans, Democrats, meat-eaters, vegetarians, rich, poor, entitled children, lost souls, and courageous explorers. If you think yours is different, take a long look at your family tree or discuss a hot topic like politics, Bitcoin, or COVID at your next family gathering.

Because of COVID, several clients asked me about naming a successor trustee for their family trust. In some cases, it’s an easy decision, but at other times it’s not. Should you list a child, and if you have multiple children, which one? If you don’t have children, do you add a cousin, a sibling, or a brother-in-law?

After decades of wealth creation, naming a successor trustee to honor your wishes should not be taken lightly, and it’s a critical decision. Will your child have the capacity to manage your estate? Will a third cousin invest your assets wisely? Who knows. And, once you’re gone, there is nothing you can do about it. Rather than naming a family member, is there a better option?

A corporate trustee could benefit all parties because they’re not emotionally attached to your family, and it’s pure business. In addition, to honoring your wishes, they’ll distribute funds to your loved ones, charities, and others you support. They’ll file trust tax returns, and, more importantly, they are perpetual. Unlike your successor trustee, they won’t die. Your child could benefit from a corporate trustee as well. The burden of managing and distributing an estate is stressful, time-consuming, and complicated. It took my mom years to settle her parent’s estate. A corporation with several attorneys, tax experts, and advisors may have been a better option for my grandparents, though my mom did an excellent job.

Corporate trustees manage several trusts, including living trusts, life insurance trusts, charitable remainder trusts, and generation-skipping trusts. In addition, they can invest your assets professionally to grow them for future generations. Of course, a corporate trustee is not free, and your estate must pay a fee for their services, but it could be money well spent if it brings you peace knowing they are honoring your wishes.

Here is a list of corporate trustees.

Schwab Personal Trust Services:

https://www.schwab.com/personal-trust-services#beacon-deck–86741

Fidelity Personal Trust Services:

https://www.fidelity.com/managed-accounts/portfolio-advisory-service/personal-trust-services

Vanguard Personal Trust Services:

https://investor.vanguard.com/advice/trust-services

The strength of a family, like the strength of an army, is in its loyalty to each other. ~ Mario Puzo

January 8, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.