TRUST & ESTATE PERSPECTIVES

The importance of a corporate trustee

How the right trustee supports your family's legacy

Trust administration can be complex; there can be intricacies that lie beneath the surface that a trustee and/or the beneficiaries may overlook. In my experience as a fiduciary advisor, I have witnessed how adversarial family dynamics, asset complexity, and wealth management and preservation for multiple generations can be more than a layperson trustee can effectively handle and that is why a corporate trustee is often the best solution.

What is a corporate trustee?

Trustees have a fiduciary duty to carry out the intent of the trust's grantor and to represent the beneficiaries' interests fairly and equitably, enabling the full benefits of trustee management. However, this can certainly be tough when family members have different ideas about how this money should be used.

Corporate trustees, such as trust companies and bank, are typically used in three different scenarios:

  1. When there is any current or anticipated discord in the family, such as heightened sibling rivalry, blended families or strained children-parent relationships.
  2. When any level of asset complexity exists.
  3. When the grantor serves as trustee for a revocable but does not want the headache.

How do you know if you need one?

A corporate trustee can help you with several different aspects including:

Wealth preservation

Beneficiaries of a trust often assume that they have control over income and principal. But, the trustee is bound by the terms of the trust. Therefore, if there is a mandatory income payout but principal is at the discretion of the trustee, budgets and assets would need to be reviewed.

The trustee would need to look at the trust assets, consider the needs of all beneficiaries and then determine the trust's longevity. Does it continue on for another generation after this current one? The wealth must be preserved for the life of the trust.

Objectivity and beneficiary communication

It is not an uncommon practice for grantors to choose a sibling or close friend to serve as trustee. In those cases, it is often necessary to remind the grantor that if the person being chosen has difficulty saying "no," or if they can't manage money, that person may not be suitable for the role. Corporate trustees act as consultants, providing objective solutions in different situations and guidance when the time comes to make a final decision.

Asset protection

Unless the trustee you've named has experience, they might not know who to reach out to. Many of our trust officers are former practicing attorneys. We regularly handle these types of trusts, deal with these issues and know what resources to use. If there is a trust administration or related tax question, we use outside tax CPAs. If there is a legal question regarding trust administration or terms, interpretation or beneficiary impact, we will engage an external attorney. We rely heavily on these professionals as our team of advisors.

Continuity

To ensure financial continuity, especially with multi-generational trusts, we must review the trust assets and terms, its intended longevity and the types of beneficiaries. Some of the questions we'd add might include: What's the age range? What are the distribution obligations? Is there a mandatory income or principal payout?

Then, we'll determine an asset allocation that fulfills all the conditions. It's important to ensure that, if the trust is intended to last for the lifetime of that child and their children, any distribution made coupled with considering trust assets will not force an earlier than intended termination.

How we can help

As a private bank, wealth and trust company SVB Private is your partner.

We work alongside you to increase the benefits of trustee oversight and to ensure that you have a strong partnership with your trust officer. We also make it a point to build relationships with the trust creators to help us gain a better understanding of grantors' and beneficiaries' unique familial and financial situations. We build trust by sharing our expertise and meeting with them on an annual or biannual basis.

What also sets SVB Private apart from others is that we take on trusts that have specialty assets. We manage trusts that contain residential and commercial property, a percentage of a business, tangibles or an art collection, while many financial institutions may not serve as a trustee for such assets, particularly real estate.

At SVB Private, we pride ourselves on being there for our trust clients, readily navigating issues others may find overwhelming.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of SVB Private or other members of Silicon Valley Bank Financial Group. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein