4 Benefits of a Corporate Trustee

The years since 2020 will likely be remembered as among the most difficult in U.S. history.

Amid a global pandemic, resulting economic shutdown and a volatile stock market, families have had to prioritize their health, have conversations about money with their children and work to preserve their assets for an uncertain future.

Wealthy families who have named a loved one as estate executor or trustee may find the responsibilities that go along with that role have become overwhelming for everyone involved.

And many families are now considering how a corporate trustee – defined as a bank or other institution appointed as executor or trustee – could provide the peace of mind that comes with knowing assets and heirs are protected.

While an individual, such as a family member, trusted friend or colleague, can serve as the trustee for an estate, many families are realizing how a corporate trustee adds objectivity and professional experience to this complex role.

“We are receiving calls from clients who say they're housebound, taking care of their businesses and their families, and they don't have the time to deal with the financial complexities of estate management in the midst of this crisis," said Alma Banuelos, head of trust and estate services for City National Bank.

“They often ask if and how they can resign and turn the responsibilities over to a corporate trustee. The knowledge that a family is in professional hands can be a great relief," she said.

Read on to learn four benefits of using a corporate trustee – especially during the challenging years that have followed the pandemic.

 

1. Invest in Business Continuity

Unlike individual trustees, corporate trustees like banks are well-suited to handle extraordinary events because they plan for such events during their business continuity strategy.

“The Bank provides a level of consistency and accountability that individuals, who face many other demands on their time, may not be able to ensure," said Banuelos.

She adds that it’s also worth noting that corporate trustees are bound by what the estate documents direct them to do, even during a crisis. Corporate trustees are flexible and look to assist beneficiaries in times of crisis, but are aware of the responsibility placed upon them by the grantor.

 

2. Help Ensure Safety and Soundness

In times of economic turbulence, families may worry about the safety of the assets held in a trust and the soundness of the trustee.

The benefits of having a corporate trustee administer a trust are rooted largely in conflict resolution, especially when there is disharmony between beneficiaries and/or interested parties.

“For example, when the trustee – a former spouse or another family member – and the decedent's children, as beneficiaries, do not agree, there could be distrust and resentment that may build," said Banuelos. “Banks, however, don't bicker. We want harmony among all parties, and we have a reputation of impartiality to protect."

Corporate trustees also have internal resources who provide guidance as part of their services. Individual trustees must often identify and hire a team of professionals for these support services.

With a corporate trustee, people can anticipate years of experience and heightened standards of transparency and safety.

 

3. Consider the Bigger Picture

The individual trustee may have the best of intentions with distribution decisions, but may also feel inclined to base these decisions solely on immediate needs.

A corporate trustee will provide an unbiased decision based on the beneficiaries' current needs while remaining mindful of the broader financial impact on the trust.

Corporate trustees' objective is to ensure that the beneficiary has means of support for many years to come and that all decisions align with the grantor's intent, particularly when requests are made during an emergency.

“If a trust beneficiary wishes to buy a house, an individual trustee may just opt to pay for it outright, which irrevocably removes those funds from the trust. A corporate trustee will evaluate the broader decision: loan vs outright distribution, married vs single for planning purposes, the impact if the beneficiary lives in a community property state, etc.," said Banuelos.

 

4. It’s a Prudent Investment

Market volatility has been on full display since the pandemic, reminding many families of why sound, long-term investments and realistic goals are critical.

Often, individual trustees do not have an experienced investment team to help them minimize volatility.

“We take grantors' wishes as well as the needs of the beneficiaries into consideration and invest to meet those wishes," said Banuelos. “For example, if the trust was funded with a closely held business, and the grantor provides explicit instructions that it is to remain in the trust, we'll take the necessary steps to try to honor the grantor's directions."

 

The Takeaway

Individuals who are serving as a trustee can always turn to a corporate trustee to steer the estate through a difficult time.

Need to discuss next steps with an advisor and wish to find one? Get in touch with a City National advisor today.