You might pick a corporate fiduciary over friends and family
Appointing someone as fiduciary over your estate or trust is a decision that shouldn’t be taken lightly. When it comes to selecting fiduciaries, many people find it difficult to choose among their children, relatives, and friends.
Some don’t believe that any of their family members or friends are capable of serving, or their children are still minors and legally can’t serve. In these situations, a corporate fiduciary may be the best choice.
What Is a Corporate Fiduciary
With any estate, a fiduciary may find themselves responsible for investing and managing assets, paying bills, record-keeping, and making distributions to beneficiaries.
A corporate fiduciary will administer your estate or trust with a high standard of care. Typically, a bank that offers trust administration services or an independent trust company can serve in this role.
Pros of Choosing a Corporate Fiduciary
Corporate fiduciaries have advanced knowledge and skill to navigate estates and trusts with ease.
Corporate fiduciaries are highly trained at what they do. They’ll have multiple staff members with many years of experience in dealing with the probate of estates and the administration of trusts and guardianship accounts.
Their easy access to portfolio managers will help ensure they prudently invest the trust funds, leading to expert management and investment services.
With no immediate ties to your beneficiaries, corporate fiduciaries won’t have the emotional stress and strain that a family member or friend could be subject to when serving.
A corporate fiduciary won’t be biased by a beneficiary’s past choices or present lifestyle and will simply administer the estate, trust, or guardianship as provided by the explicit terms of your last will and testament or revocable living trust and applicable state law.
A bank or independent trust company acting as a fiduciary will have all of the resources they need under one roof. This could include investment services, brokerage services, estate or trust accounting services, and business and real estate management services.
On the other hand, individual fiduciaries will be required to hire multiple professionals to oversee all aspects of the administration of the estate, trust, or guardianship.
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Corporate fiduciaries are corporations, which means they’re required to be licensed, bonded, and insured. They are subject to strict state and federal regulations and held to a very high standard of care above and beyond the average person when managing an estate, trust, or guardianship.
If a corporate fiduciary does make a mistake, a judge may be more likely to rule against the institution, making the company appropriate funds to pay for its mistakes.
This generally won’t be the case with an individual fiduciary who has little or no experience and will only be held liable for acts or omissions that amount to gross negligence.
Cons of Choosing a Corporate Fiduciary
For all the benefits, a corporate fiduciary may not be the best choice for you. Consider these points to help you decide if you should stick with an individual as a fiduciary for your estate or trust.
Lack of Flexibility
Corporate fiduciaries can be extremely rigid and set in their ways when it comes to investing, managing, and spending the assets of an estate, trust, or guardianship. This lack of flexibility can lead to unhappy beneficiaries who will be forced to go to court to resolve disputes between them and the institution.
One way to avoid this problem is to put very specific instructions in your last will and testament or revocable living trust agreement to give the fiduciary strict guidelines to follow.
In order to provide all of its professional services, a corporate fiduciary will generally cost more than an individual fiduciary. As mentioned above, however, an individual will most likely need to hire a slew of professionals to assist with all the aspects of administration. The fees can certainly add up and may cost just as much as, or even more than, an institution’s fees.
Corporate fiduciaries use committees to make many of their decisions, which can lead to slow responses to a beneficiary’s questions or concerns. A committee approach can also mean lost opportunities in investments that require quick responses, as well as prolonged probate administration.
Corporate fiduciaries are corporations made up of multiple departments and offices located in different buildings and, perhaps, various cities. Cutting through the red tape to find someone who can help in a pinch can be daunting.
What You Should Do
Corporate fiduciaries aren’t the right choice for everyone. But if you’re concerned about the ability of family members or friends, talk to several banks or trust companies to learn more about their services and fees.
Instead of a “big box” fiduciary, consider appointing a smaller, local bank or trust company. These types of corporate fiduciaries are usually very hands-on with their clients and will generally work with a lower net value than a larger company.