Family switching corporate trustee

July 20, 2020

5 Reasons to Switch to A Corporate Trustee

It is clear that even half-way through 2020, this year will likely be recorded as one of the most difficult in U.S. history.

Amid a global pandemic, resulting economic shutdown and a volatile stock market, families have had to prioritize their health, have conversations about money with their children and work to preserve their assets for an uncertain future.

Wealthy families who have named a loved one as estate executor or trustee may find the responsibilities that go along with that role have become overwhelming for everyone.

Many of them are considering how a corporate trustee, defined as a bank or other institution appointed as executor or trustee, could provide the peace of mind that comes with knowing assets and heirs are protected.

While an individual, such as a family member, trusted friend or colleague, can serve as the trustee for an estate, many families are realizing how a corporate trustee fills the role with the added value of objectivity and professional experience.

“We are receiving calls from clients who say they're housebound, taking care of their businesses and their families, and they don't have the time to deal with the financial complexities of estate management in the midst of this crisis," said Alma Banuelos, head of trust and estate services for City National Bank.

“They often ask if and how they can resign and turn the responsibilities over to a corporate trustee. The knowledge that a family is in professional hands can be a great relief," she said.

Below are five benefits of using a corporate trustee at any time, but especially during challenging years like 2020.

You're investing in business continuity

Unlike individual trustees, corporate trustees like banks are well-suited to handle extraordinary events because they plan for such events during their business continuity strategy.

“The Bank provides a level of consistency and accountability that individuals, who face many other demands on their time, may not be able to ensure," said Banuelos.

It also is worth noting that corporate trustees are bound by what the estate documents direct them to do, even during a crisis, she added. Corporate trustees are flexible and look to assist beneficiaries in times of crisis, but they also are aware of the responsibility placed upon them by the grantor.

You can expect safety and soundness

In times of economic turbulence, families can worry about the safety of the assets held in a trust and the soundness of the trustee.

The benefits of having a corporate trustee administer a trust are rooted largely in conflict resolution, especially when there is disharmony between beneficiaries and/or interested parties.

“For example, when the trustee - a former spouse or another family member - and the decedent's children, as beneficiaries, do not agree, there could be distrust and resentment that may build," said Banuelos. “Banks, however, don't bicker. We want harmony among all parties, and we have a reputation of impartiality to protect."

Corporate trustees also have internal resources who provide guidance as part of their services, while individual trustees must identify and hire a team of professionals for these support services.

With a corporate trustee, people can anticipate years of experience and heightened standards of transparency and safety.

You're considering the bigger picture

The individual trustee may have the very best of intentions with distribution decisions, but an individual trustee may feel inclined to base these decisions solely on immediate needs.

A corporate trustee will provide an unbiased decision based on the beneficiaries' current needs, but they do this while remaining mindful of the broader financial impact on the trust.

Corporate trustees' objective is to ensure the beneficiary has means of support for many years to come and that all decisions align with the grantor's intent, particularly when requests are made during an emergency.

“If a trust beneficiary wishes to buy a house, an individual trustee may just opt to pay for it outright, which irrevocably removes those funds from the trust. A corporate trustee will evaluate the broader decision: loan vs outright distribution, married vs single for planning purposes, the impact if the beneficiary lives in a community property state, etc.," said Banuelos.

Now more than ever, it's a prudent investment

Market volatility is on full display this year, reminding many families of why sound, long-term investments and realistic goals are critical.

Often times, individual trustees do not have an experienced investment team to help them minimize volatility.

“We take grantors' wishes as well as the needs of the beneficiaries into consideration and invest to meet those wishes," said Banuelos. “For example, if the trust was funded with a closely held business, and the grantor provides explicit instructions that it is to remain in the trust, we'll take the necessary steps to try to honor the grantor's directions."

Individuals who are serving as a trustee can always turn to a corporate trustee to steer the estate through a difficult time. Need to discuss next steps with an advisor and wish to find one? Get in touch with a City National advisor today.

This article is for general information and education only. It is not to be construed as an offer, or solicitation of an offer, to buy or sell any financial instrument. It should not be relied upon as specific investment advice directed to the reader's specific investment objectives. Any financial instrument discussed in this article may not be suitable for the reader. Each reader must make his or her own investment decision, using an independent advisor if prudent, based on his or her own investment objective and financial situation. Prices and availability of financial instruments are subject to change without notice. Financial instruments denominated in a foreign currency are subject to exchange rate risk in addition to the risk of the investment. City National Bank (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this article and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results.

City National, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented, taking into account your own particular circumstances.

This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.