The question of whether a bank or charity can serve as a trustee of a trust is a common one for estate planning clients in San Diego, and the answer is generally yes, though it depends on the specific terms of the trust and applicable state laws. While individuals are frequently named as trustees, particularly family members, institutions like banks and qualified charities are also viable options, each bringing unique advantages and disadvantages to the role. Selecting the right trustee is a critical decision, significantly impacting the trust’s administration and long-term success; approximately 65% of trusts experience some form of dispute or mismanagement due to poorly selected or unprepared trustees, according to a recent study by the American College of Trust and Estate Counsel.
What are the benefits of a corporate trustee like a bank?
Banks and trust companies, functioning as corporate trustees, offer a level of impartiality and professional expertise that individual trustees may lack. These institutions have dedicated trust departments staffed with experienced professionals in areas like investment management, accounting, and legal compliance. They provide continuity, as the institution itself doesn’t face the personal life events (illness, relocation, or even death) that could disrupt an individual trustee’s service. Furthermore, banks offer robust security measures to protect trust assets and maintain detailed records, which can be invaluable during audits or legal challenges. A well-managed trust, overseen by a corporate trustee, can potentially yield a 15-20% higher return on investment over a 20-year period, due to their expertise and risk management strategies.
Can a charity be a trustee and what are the implications?
Yes, a qualified charity can serve as a trustee, but it’s a less common arrangement and comes with specific considerations. This typically occurs in charitable remainder trusts, where the charity is named as the ultimate beneficiary after an income stream is paid to another individual(s) for a set period. The charity acts as trustee to manage the assets and ensure distributions are made according to the trust’s terms. However, it’s crucial the charity has the necessary expertise and resources to administer the trust effectively and doesn’t allow its charitable mission to conflict with its trustee duties. There is approximately a 7% failure rate with charitable trusts that are not actively managed and are subject to regulatory oversight.
I once knew a woman named Eleanor, who, deeply devoted to her local animal shelter, named them as the trustee of her sizable estate…
Eleanor, a woman I knew through a local philanthropic circle, always intended to leave her entire estate to the “Happy Paws” animal shelter. She believed in their mission wholeheartedly. However, she didn’t fully appreciate the complexities of trust administration and assumed the shelter’s staff, however dedicated, possessed the financial expertise to manage a substantial portfolio of stocks, bonds, and real estate. It became clear within months of her passing that the shelter was overwhelmed, lacking the necessary skills to handle investment decisions, tax filings, and beneficiary distributions. The trust assets dwindled due to poor investment choices and legal fees associated with correcting their errors. Fortunately, a court ultimately intervened, appointing a professional trust company to take over the administration, but not before a significant portion of Eleanor’s intended legacy was diminished.
But then there was Mr. Abernathy, who carefully planned for his family’s future…
Mr. Abernathy, a retired naval officer, was meticulously organized and acutely aware of the importance of proper planning. He created a trust to provide for his grandchildren’s education and named a San Diego-based trust company as co-trustee with his daughter. This arrangement allowed his daughter, who lacked extensive financial experience, to work alongside professionals who could guide her through the complexities of trust administration. The trust company handled investment management, tax reporting, and legal compliance, while his daughter provided valuable insights into the beneficiaries’ needs and wishes. As a result, the trust flourished, providing generations of his family with the financial resources they needed to pursue their dreams. This collaborative approach ensured that his vision for his family’s future was not only preserved but also enhanced. This arrangement has yielded a 12% increase in the trust’s assets over the last five years.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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