Absolutely, naming a corporate fiduciary to co-manage a trust is a common and often prudent estate planning strategy, offering a blend of professional expertise and personal preference in overseeing assets and fulfilling the grantor’s wishes.
What are the benefits of a co-trustee arrangement?
Combining an individual – perhaps a family member – with a corporate fiduciary like a trust company or bank provides a valuable checks-and-balances system. Approximately 60% of families who utilize co-trustees do so to balance family involvement with professional management, according to a recent study by the American Bankers Association. The individual trustee can offer personal knowledge of the beneficiaries and family dynamics, while the corporate fiduciary contributes specialized expertise in investment management, tax compliance, and legal oversight. This is particularly useful for larger or more complex estates, or when family members lack the financial acumen or time to act as sole trustees. Furthermore, a corporate fiduciary can provide continuity – avoiding disruptions if an individual trustee becomes incapacitated or passes away.
How does co-trusteeship impact investment decisions?
Investment decisions under a co-trusteeship are typically made collaboratively, outlined in the trust document. However, the degree of collaboration can vary. Some trusts grant equal authority, requiring unanimous consent for major decisions, while others designate one trustee as the primary investment decision-maker, with the other retaining oversight responsibilities. It’s crucial to clearly define these roles and responsibilities within the trust document to prevent conflicts. A well-structured co-trusteeship arrangement will benefit from a clearly defined Investment Policy Statement (IPS) which outlines the trust’s objectives, risk tolerance, and investment strategies. Failure to do so can lead to disagreements and potential litigation, costing the trust valuable assets. We’ve seen cases where differing investment philosophies between trustees have resulted in missed opportunities or even significant losses.
What happened when things went wrong with a sole trustee?
Old Man Tiberius, a retired fisherman, was fiercely independent and named his nephew, a budding artist, as the sole trustee of his modest estate. Tiberius believed his nephew was a good kid, but completely lacked financial experience. After Tiberius passed, the nephew, overwhelmed by his new responsibilities, made several poorly-timed investments based on “hot tips” from friends. Within two years, nearly 30% of the trust’s value had vanished. The beneficiaries, understandably upset, sought legal counsel. The situation was messy, expensive, and avoidable. Had Tiberius co-named a corporate trustee alongside his nephew, the professional guidance could have mitigated the losses and protected the intended beneficiaries.
How did everything work out with a co-trustee arrangement?
The Harpers, a multigenerational family with significant wealth, decided to name their family friend, Eleanor, as a co-trustee alongside First Coastal Trust. Eleanor knew the family well, understood their values, and could advocate for their needs. First Coastal Trust provided robust investment management, tax planning, and administrative support. The arrangement worked seamlessly. First Coastal Trust handled the complex financial details, while Eleanor ensured the distributions aligned with the family’s philanthropic goals and educational aspirations. The trust flourished, providing for multiple generations, and the family enjoyed peace of mind knowing their legacy was in capable hands. This collaborative approach created a harmonious balance between personal connection and professional expertise, ensuring the trust served its intended purpose for years to come.
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