The Value of a Corporate Trustee
Choosing a trustee is a decision that may affect you and your family for generations. To ensure your trust is properly managed, you will want to find a trustee that has the necessary expertise, experience, resources and time. A corporate trustee may be the most appropriate option for your trust.
Role of the Trustee
A trustee is bound by fiduciary duty. This means that the trustee must administer the trust according to its terms and conditions and behave in a matter that is in the best interests of the trust and its beneficiaries, and not their own.
The trustee is responsible for administering a trust based on instructions documented in the trust agreement, the nature and purpose of the trust and governing state laws. The typical responsibilities of trust administration, such as fiduciary oversight, investment management, distribution and tax compliance, require a significant time commitment. Often, trusts last for many years, if not decades. Corporate trustees can provide the professional expertise, staffing and longevity that an individual trustee, family member or friend may not have.
Benefits of a Corporate Trustee
Administering trusts can be complex. You and the beneficiaries may benefit from an additional level of diligence that a corporate trustee can provide in areas such as:
Impartiality
Navigating family dynamics can be difficult. A corporate trustee typically does not have the familial history, distractions or conflicts of interest that may arise with an individual trustee. A corporate trustee can remain objective and focused on achieving the goals expressed in the trust instrument. It is imperative the trustee exercise care when making discretionary decisions that could affect the interests of one set of beneficiaries over another.
Investment Management
Investing and managing trust assets require experience to structure a portfolio that aligns with the purpose and tax attributes of the trust. A corporate trustee should have the expertise to determine an appropriate investment policy and asset allocation, keeping in mind the present and future needs of the current and remainder beneficiaries and the trust’s time horizon.
A corporate trustee should know and adhere to applicable laws, including the prudent investor rule, which in most cases is the legal guideline for trustees of investment portfolios. This rule requires fiduciaries to invest trust assets as if they were their own and to construct a portfolio compatible with the purpose and objectives of the trust.
Fiduciary Oversight
Regarding legal aspects, a corporate trustee should understand the requirements applicable to their fiduciary responsibilities, including safeguarding and maintaining accountability for the trust’s assets. They should comprehend the complexity of property stewardship, income and transfer taxes, financial management and accounting requirements.
| A corporate trustee has a range of fiduciary obligations, including: 1. The duty of care — to prudently administer all aspects of a trust with reasonable skill and caution, measured on an objective scale. 2. The duty of loyalty — to administer the trust in the best interests of the beneficiaries. A corporate trustee has a range of fiduciary obligations, including: 1. The duty of care — to prudently administer all aspects of a trust with reasonable skill and caution, measured on an objective scale. 2. The duty of loyalty — to administer the trust in the best interests of the beneficiaries. |
Recordkeeping and Administration
As part of administering the trust appropriately and efficiently, a trustee must maintain proper trust records of assets, receipts, disbursements, distributions and all trust transactions from its inception, and communicate updates to the beneficiaries through annual or more frequent accountings. This in-depth recordkeeping requires technology and processes. Trust laws are different from state to state. A corporate trustee must be well-versed on the differences to administer the trust in accordance with the applicable state statutory requirements. It also must understand and comply with federal and state income tax reporting requirements.
Continuity of Service
A corporate trustee should be able to serve until the trust terminates, which may not occur for decades or centuries. Unlike a noncorporate (i.e., individual) trustee, there is no risk of having to replace an individual who is unable to serve or continue to serve perhaps due to death, incapacity, incompetence, complexity or time commitment. With a corporate trustee, you can benefit from service without delays, interruptions or vacancies in trusteeship. In most cases, a corporate trustee can be removed once appointed without difficulty. The trust agreement should contain a provision allowing for the removal and replacement of a corporate trustee to avoid the need to go to court to do so.
Glenmede, an Experienced Corporate Trustee
With over 65 years of experience serving as a corporate trustee, Glenmede can provide the knowledge, judgment, continuity and resources to administer a trust with the necessary fiduciary care and responsibility.
This material provides information of possible interest to Glenmede Trust Company clients and friends and is not intended as investment, tax or legal advice. Any opinions, recommendations, expectations and/or projections expressed herein may change after the date of publication. Information obtained from third-party sources is assumed to be reliable but may not be independently verified, and the accuracy thereof is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss any matter discussed herein with their tax advisor, attorney or Glenmede Relationship Manager.