Why Should I Consider a Bank as a Trustee of My Trust?
Setting up a trust is an integral part of many people’s estate plans. When setting up the trust, one critical decision is who should be the trustee. That person or organization is responsible for managing the trust and caring for its finances, whether filing taxes, distributing assets to beneficiaries, or keeping detailed records.
Sometimes, having a trustworthy close family member or friend makes sense in the trustee role. But other organizations can also act as the trustee, including banks. Here’s why banks are worth considering for the trustee role.
Protection for the Trust and Beneficiaries
Banks have effective systems of checks and balances. It’s less likely that a bank trustee will misuse the funds or outright steal them. On the rare occasion that happens, banks usually have financial security and insurance that can make reimbursement of the trust a strong possibility. That’s in contrast to a trust run by a friend or family member where, if losses occur, it may not be possible to recoup them.
No Conflicts of Interest
Family and friends can easily have conflicts of interest that would make it difficult for them to manage the trust objectively and with everyone’s best interests at heart. Bank trustees don’t have those kinds of conflicts and can keep the trust’s best interests at the forefront.
A family member or friend is not likely to be a specialist in managing trusts and will have to learn as they go. That’s a process ripe for mistakes, which can be costly. Banks have entire trust departments that work only on trusts—it’s their job. They stay current on changes in trust laws and regulations, they have extensive experience that can be valuable for the trust, and they’ll understand all the financial implications, including taxes, of the trust.
If someone selects a family member for a trust that involves minor children, and that trustee passes away before the children become legal adults and are entitled to the trust, a new trustee must step in and take over. If it’s another family member or friend, a second learning curve could be involved. With a bank, the actual person overseeing the trust may change, but the bank will handle it and will appoint another knowledgeable, experienced employee as trustee.
Let me Advise You
If you or someone you know wants to investigate setting up trusts, call me at 610-718-6368.