Many people choose an adult child or other relative to serve as the successor Trustee of their trusts. However, there are often concerns about a relative’s ability to administer a trust, such as sibling rivalries, personal obligations, or irresponsibility.
In situations where a client does not have a clear, solid choice for a successor trustee, they may consider a professional trustee. There are two general types of professional trustees.
Licensed Professional Fiduciaries:
A licensed professional fiduciary is precisely that —a professional fiduciary who the state of California has licensed. They are required to undergo extensive education and background checks, including fingerprints, before they are licensed to serve as professional trustees. You can find additional information about licensing requirements on the Professional Fiduciary Association of California website: pfac-pro.org.
Pros:
Licensed professional fiduciaries are efficient trustees because they are professional trustees and handle trust administrations as a daily part of their jobs. Compared to, for example, a child who has no formal education or experience in trust administration, a licensed professional fiduciary is much more efficient.
In this way, licensed professional fiduciaries often save the trust money on legal fees because they are able to act independently during many phases of the trust administration. By contrast, a child trustee often requires significantly more assistance from an attorney throughout the administration of the trust. Licensed professional fiduciaries do charge fees for their services, but it is important to note that any trustee, even a relative, is entitled to reasonable compensation.
Con:
Licensed professional fiduciaries often work alone or in small firms. Therefore, there may be a concern that the fiduciary selected to serve as a successor trustee is no longer working or alive at the time of the trust maker’s death.
Corporate Trustees:
Corporate trustees are also professional trustees. Most large banks have a trust department staffed with corporate trustees.
Pros:
Similar to licensed professional fiduciaries, corporate trustees are also efficient trustees because they administer trusts professionally.
Additionally, a corporate trustee is more likely to remain in existence after a trust maker’s death, as banks tend to have a long lifespan. Of course, this is not a guarantee. Still, it is more likely that a large bank will have an operating trust department in several decades than it is that a solo licensed professional fiduciary will still be working at that time.
Cons:
Most corporate trustees have minimums, meaning they will not take on a trust administration that does not meet a certain asset value threshold. Therefore, a corporate trustee may not be the best choice for a modest trust estate. Additionally, corporate trustees also have set fees for their services, often a set percentage of the total value of the trust assets.
Some corporate trustees do not handle trusts that own specific assets. For example, some corporate trustees will not accept trust administrations involving real estate or cryptocurrency. It is essential to research the corporate trustee you are considering to confirm that it will accept your trust administration upon your death.
For many families, selecting a professional trustee may be the best choice to avoid conflicts among family members or to ensure that their trusts are efficiently administered. If you are considering naming a professional fiduciary as your successor, we at Absolute Trust Counsel would be happy to discuss your options with you.
[AD] Estate planning addresses many important factors about your future and legacy. Where do you get started if you don’t have an estate plan in place? If you do, how have new laws and life transitions changed? Will your plan still protect you? Regardless, you deserve to have control over your wants, needs, goals, and hopes for the future. We can help you understand your options and, legally, how you will best be protected at all touchpoints. Get started today by scheduling a free discovery call so we can discuss your needs. Visit https://absolutetrustcounsel.com/scheduling/ or call us at (925) 943-2740.
