How do you determine who should act as trustee?
A great deal of thought should go into this decision. You can select a family member to act as trustee, but you should think about family dynamics and how this decision could impact everyone. One advantage of choosing a family member is that they will often waive the fee for serving as trustee, or charge a lesser fee than a corporate trustee. This is an important consideration for a modest-sized trust, because it preserves the principal and income for the family’s needs.
Another approach is to appoint a corporate trustee to provide objective advice and act only in the beneficiaries’ best interests. A corporate trustee will make decisions based on a clear set of guidelines, often by committee, and could be a bank or firm that has the ability to make in-depth, knowledgeable and unbiased decisions. This approach also helps to insulate family members from having to make difficult decisions about distributions from a trust.
Appointing a corporate trustee is also a good option when a family business is involved, and the heirs do not know how to run the business. Corporate trustees have experts in managing closely held businesses, real estate and other special and unique assets and these experts can advise and assist in the management of the business. If you anticipate liquidity as an issue in the continuation of the business operations, a comprehensive financial plan will help you determine whether it is wise to implement life insurance strategies to provide for the ongoing operation of the business.
In addition, a corporate trustee can also find resources to assist your spouse to ensure they receive the care they need after your death or to help a child or other relative with special needs who requires lifelong care. The trustee has broad discretion to pay income and principal and can be allowed to make medical decisions, make decisions regarding treatment that is affordable and appropriate, help control spending and decide objectively and rationally about a beneficiary’s short-term and long-term needs to allow the conservation of trust assets.
How can executives begin estate planning?
Start by calling your attorney to find out if he or she specializes in estate planning or can make a recommendation for an estate planning attorney. You may also contact your relationship manager at your corporation’s bank to connect you with their trust department. At larger banks, a wealth strategist can assist with preliminary discussions about planning and will join your personal team of financial advisers — your banker, attorney and accountant — to uncover, develop and implement investment planning strategies customized for you and your business.
Disclosure: Wills, trusts, foundations and wealth planning strategies have legal, tax, accounting and other implications. Consult a competent legal or tax adviser.
Dexter Lowry is a certified financial planner at Union Bank, N.A. in San Francisco. Reach him at [email protected] or (415) 705-7173.