Financial institutions that serve as a corporate trustee generally require that they retain full authority over the investment of the assets and their deployment for the support of the trust beneficiary. Most trust companies require that they hold and manage the assets. This requirement effectively means that the Financial Advisor loses control of this portion, or often all, of their client’s assets.
CGTC allows the creator of a trust to direct them to follow the investment selections of an outside advisor. This business model permits control over the assets & the revenue they generate to remain with the Financial Advisor. Coral Gables Trust has the responsibility to administer the trust. Since we do not select the investments we are able to significantly reduce our fee. The combined trust administration and investment fees are often less than the fees charged by a “full service trustee.”
CGTC and the Financial Advisor are focused on what each does best and the interests of our mutual clients are better served by this business model.
HOW A DIRECTED TRUST WORKS?
• Grantor appoints the Financial Advisor under the controlling document, thus assuring that the primary client relationship remains with the advisor, not the trust company.
• The Financial Advisor is charged with all investment duties and is held responsible for the investment performance.
• This eliminates the trustee’s duty to supervise specific investments and therefore divides the responsibilities.
• Coral Gables Trust is charged with all trust administration duties and held responsible for their proper execution.
• Directed trusts easily accommodate multiple fiduciaries and non fiduciary appointments like trust protectors.
THE PRIMARY DUTIES OF THE TRUSTEE
These include making periodic income payments as agreed by the beneficiary and the trustee.
Trustees must also pay out principal as set forth in the trust agreement and attend to all other matters instructed by the trust.
The trustee’s fiduciary duty may require it to exercise its judgment on a variety of matters. Language in the document often permits principal to be distributed for the maintenance and support of a beneficiary. The trustee may have to consider other sources of income available to the beneficiary as well as the potential future needs of the next generation.
Financial Advisors often view the corporate trustee as performing a “back office” function and is therefore less important when the relationship is running smoothly. However, trust administration is critical and may be of primary importance to the grantor.
High net worth individuals often state that their chief concern is for proper, attentive care for their family. These clients have often worked with their investment advisors for years, while the process of trust administration is outside of their experience.
CGTC’s business model assures continuity of the relationship with the Financial Advisor which is partnered with a professional team of trust officers.