This week we've invited Gerardo Rodriguez, VP and Investment Officer at Coral Gables Trust Company to challenge us with the question: Do you know your Trustee well?
What to think about when selecting a Trustee? Estate Planning can be a daunting task. You have to find an attorney that can help you organize yourself and your assets that will create your Estate when you pass and leave your bequest to your heirs. You have to draft a will, select a Health Care Surrogate, and create a Trust to place your assets in to avoid Probate. One of the biggest questions is who would you select as the Trustee of your Trust. A Trustee is, according to Merriam-Webster Dictionary, simply a natural or legal person to whom property is legally committed to be administered for the benefit of a beneficiary (such as a person or a charitable organization), or one (such as a corporate director) occupying a position of trust and performing functions comparable to those of a trustee.
When looking at choosing a Personal or Corporate Trustee, think about these five main points to help you decide what route you want to go: 1) experience, 2) resources needed, 3) trust (as in how much trust do you have in the person or company), 4) longevity, and 5) costs. Looking at these five points will help you whittle down your choice to what you truly need for your situation.
When it comes to a Trust and designating a Trustee, most people think first about costs. I put this as the fifth point because costs should not be your main focus when it comes to this decision. The complexity of your Trust may need certain services such as a Tax Attorney, a CPA, a Trust and Estate Attorney (if you don’t already have one to begin the process of creating your Estate) or even a Family Law Attorney. If your Trust isn’t that complicated, then find out about the services you explicitly need to help make your decision easier for designating a Trustee so that you can have peace of mind that your Trust will be managed correctly for your beneficiaries.
Whether you choose a Personal or Corporate Trustee to manage your Trust, one thing to keep in mind is how much you trust the person or company and how reliable they are. It may be helpful if your Personal Candidates are trusted individuals that know your family and your family’s dynamics. Your Personal Candidates will have to be comfortable with the legal liability of being named a Trustee. With Corporate Candidates, find out if they have a person that will be the Relationship Manager that will get to know the family that will coordinate communication and meetings with the family. As per managing your Trust to the letter of the document, a Corporate Trustee is government regulated entity, so they have to manage the Trust by what the document stipulates or they can potentially be fined or face other penalties. You will want to verify that the Trustee is reliable enough to meet with the family either annually, semiannually, quarterly, or monthly, depending on your wishes and the needs of the beneficiaries. If there are liquid investments and/or other assets that are being managed, scrutinize the Trustee in order to determine their level of Investment expertise with regard to the asset classes as well as determine their ability to provide performance reporting. Keeping the family abreast of the performance of the Trust is one of the fiduciary duties the Trustee must perform. Having trust in your candidates, either Personal or Corporate, is a big factor in who you will eventually hire at the end of the process.
How long your Trust needs to be managed is an important factor in deciding the designation of a Trustee. As I stated before, every situation is unique, so take the time to identify your needs with respect to your Estate so as to get the right fit for your circumstances. Take into account in your planning how many beneficiaries there are, the complexity of the structure, and what level of experience you are going to need with respect to managing your assets so that you can figure out how long or short of a time you will need the Trustee. Combining all these factors will trim down your candidate list as you start to “check off your boxes” in your interview process.
By this juncture, you should have a good idea of your best options. So now it is down to cost. If you base your search on cost, you will no-doubtedly start with the lowest cost, which will lead to a “no-frills” style of service. If your situation is not complex and you don’t need the services, this may be the way to go. If after your analysis, you realize your Trust and Estate will be more complex then going with a low-cost option may not be the best option. Once you have a grasp for the complexity or simplicity of your Trust and Estate, cost should be a less relevant factor.
Now that you have gone through this exercise and have decided on either a Personal or Corporate Trustee, your Estate Planning should become a little simpler. Going through this examination will help you get a better handle on your Estate and will also help give your beneficiaries a reference point with respect to the Trust and who they should speak to. If you do consider a Corporate Trustee, I hope this information was helpful enough to add Coral Gables Trust Company as a prospective candidate to meet with and to learn more.