Trust administration is more difficult than many families presume.
In an ideal world, managing a family trust would be simple. There would be no stress, no big learning curve, and no great time commitment involved. Unfortunately, the world is not ideal, and heirs who become trustees are often left with headaches.
“Sure,” a named trustee may think, “I can follow the rules, pay the taxes, and make sure this asset goes to this person or organization. I am confident I can deal with any issues.”
Okay, but what if the trust includes income-producing real estate, intellectual property created with collaborators, or a large investment portfolio? A trustee can quickly lose confidence when trying to understand these assets; let alone, the tax and legal issues linked to them. Additionally, the greater the complexity of the estate, the wider the door opens for family arguments about the way trust assets are being handled.
Keep in mind that this article is for informational purposes only. It is not a replacement for real-life advice, so make sure to consult a financial professional before modifying your trust strategy.
Corporate trustees bring objectivity, knowledge, and rigor to trust administration. As they are either trust companies or bank trust departments, they are regulated by state and federal agencies. They are held to a fiduciary standard: they have to act in the client’s best interest.1,2
Many of the professionals working for corporate trustees are knowledgeable about multiple kinds of assets and the strategies used to administer them. Plus, they are resources; if you need more knowledge about a particular matter, they may have it or be able to connect you with someone who does.1
While an heir essentially takes on a part-time job in becoming a trustee, the professionals employed by corporate trustees make trust administration their career. As they are outside your family, they are not at risk of letting your family’s history or tensions influence their work.
How much does corporate trust administration cost? The annual fee commonly ranges between 0.25% to 2.00% of the trust assets. Your family may feel that professional trust management is well worth this expense. A corporate trustee may even be named as a successor trustee in the event that no financially responsible trust beneficiaries remain.2
Trust administration costs vary based on the corporate trustee and the complexity and any special requirements of the trust. Trust administration costs are in addition to any fees charged by a broker-dealer and/or registered investment adviser on trust assets managed or held with the financial institution. Trust services are offered by CommunityAmerica Financial Solutions, LLC (“CAFS”) in its capacity as a registered investment adviser. CAFS does not provide legal or tax advice. Please consult with a legal or tax professional on your specific situation.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – EstatePlanning.com, July 29, 2020
2 – Investopedia, April 26, 2020