Estate Planning- Wills & Trusts: Should I Appoint A Corporate Executor and Corporate Trustee of My Estate and Trust?
Who you appoint as executor of your will or as trustee of your trust is an important decision because the positions carry significant responsibility. Executors and trustees (“fiduciary” or “fiduciaries”) must efficiently administer your estate or trust, respectively, and your fiduciary will have responsibility for the financial well-being of your current and future beneficiaries. You may appoint as executor or trustee individuals or certain financial institutions, like banks or trust companies, or a combination of the two. There are benefits to choosing each, and who you should choose will depend on your desires, needs, and financial circumstances.
1. Corporate Fiduciaries
You may appoint a corporate executor and corporate trustee. Generally, the choices for corporate fiduciaries are banks, specifically their trust or wealth management department, or trust companies.
Experience. In cases where the estate or trust is complex and will require significant time and effort to oversee, a corporate trustee is normally recommended. Corporate fiduciaries generally will have experience, having provided such services countless times before. Most likely, your fiduciary will have to manage the investment of trust or estate assets. Corporate fiduciaries can provide an investment platform for you the client – they can tailor your investment goals to your needs, and the needs of your beneficiaries, whether they be to maintain principal or generate income or a combination of the two. Ultimately, your fiduciary must be comfortable making investment decisions or choosing and monitoring investment professionals, weighing and evaluating distribution requests, and making other important decisions. Corporate fiduciaries do this on a regular basis and will have the resources and contacts to necessary to make the important investment decisions your trust or estate may require.
Record keeping. Your fiduciary must be willing to accept significant recordkeeping responsibilities. Your fiduciary will have to account for the receipt and disbursement of income and principal from the estate or trust assets. It will have to prepare and file tax returns. On top of all the standard recordkeeping that must be completed, your fiduciary will have to keep up with all the changes in tax and other estate/trust laws and regulations. A corporate fiduciary will have access to accountants, lawyers, and other professionals who will assist in the administration and preparation of these records.
Continuity. Corporate fiduciaries are generally permanent in existence. Permanence is important because you may establish a trust with administration that lasts for decades. If you appoint an individual as trustee, he/she may die, become ill, or otherwise be unavailable to perform the services required through the duration of the trust’s existence. Rather, you want a presence in that position to be able to adapt and last through your family’s changing and continuing situation.
Objectivity. Families will often fight amongst themselves and corporate trustees are generally impartial. Families fight especially when emotions run high, such as after the death of a loved one and/or head of a family. Thus, it may be wise to appoint an outsider to oversee the administration of your trust or estate. A corporate fiduciary will make decisions free from bias and considerations of family dynamics, and will not succumb to pressure from a beneficiary who wants inappropriate distributions to be made. A corporate fiduciary will treat all beneficiaries as they are supposed to be treated under the terms of the document.
The bottom line is that corporate fiduciaries provide professionalism and they generally have years of experience administering estates and trusts. They know the problems that will arise during administration.
2. Individuals
You may appoint any individual as your fiduciary. Generally, you should appoint family members or close, trusted, long-term personal advisors because you want to appoint someone with personal knowledge of your desires, needs, and expectations as to how and when your estate or money should be distributed. These individuals can provide an important personal voice in the management and distributions of your assets. By appointing an individual close to you, you will be able to have someone who can speak for you when you are not there. An individual fiduciary will know whether a certain beneficiary should receive a distribution under certain circumstances, such as whether money should be withheld from a beneficiary who may want go to “another” school or start a business but ultimately will not follow through no matter how much money he or she receives.
3. Co-Trustees
The most prudent decision in choosing a fiduciary may be to appoint a corporate fiduciary and a close individual as co-fiduciaries. In this scenario, you will obtain all the benefits of the corporate fiduciary discussed above. You will ensure that your assets are invested wisely and administration is taken care of professionally. You will also have the personal touch of appointing a close individual. This person will have a greater sense of your personal wishes and feelings than a bank or trust company would.
By appointing corporate and individual co-fiduciaries, you may set up a checks and balances dynamic. You may give the individual co-fiduciary power to resolve disagreements. For example, if a disagreement arises over whether a business should be retained or sold, or whether a distribution should be made, you may direct that the individual co-fiduciary’s decision control. You may stipulate in the document that the individual co-fiduciary will have the power to negotiate the corporate fiduciary’s fees. This way, you’ll have an insider in place who will control costs. You may authorize the individual co-fiduciary to remove the corporate fiduciary and appoint a new corporate fiduciary. Thus, if the corporate fiduciary is not performing its duties to par, a better one can be put in its place.
On the other hand, you may draft the document so that the corporate trustee will have sole decision making power on certain distributions and use of assets in the case where the beneficiary in question is also the co-fiduciary. This way, you prevent the individual co-fiduciary from inappropriately benefiting himself to the exclusion of other beneficiaries.
Perhaps as part of appointing three co-fiduciaries you may direct that the co-fiduciaries act by majority rule, with two or more co-fiduciaries having to agree in the trust or estate administration. If an individual and a bank are named as co-fiduciaries, the individual may oversee the actions of the corporate fiduciary and the corporate fiduciary may ensure that the individual cannot mismanage the administration by acting alone.
Appointing a fiduciary to manage your estate or trust is an important estate planning decision. The appointment should not be made lightly. Consider appointing a corporate fiduciary for the all of the benefits that come from professional administration of your estate or trust. Furthermore, consider appointing corporate and individual co-fiduciaries so that you gain all of the professional benefits, plus the individual personal touch and decision-making from someone who knows you and your wishes best.
Contact our Estate Planning & Business Law Firm we have the experienced Philadelphia Business Planning Attorneys to help you on your questions and concerns.