A recent survey identified that more than 75% of those surveyed chose a family member as a Guardian for their kids or pets or to act as an Executor, Trustee, or Beneficiary of their estate plan.1
Relying on family to be the trustee of your estate plan is certainly the traditional approach, but there are good reasons for involving non-family members in your trust.
What is the role of a trustee?
A trust is often created to ensure an individual’s assets are appropriately distributed after they pass. That individual assigns a trustee to manage the trust. The trustee is then charged with ensuring that the grantor’s wishes are fulfilled. They are responsible for properly managing all property and other assets placed in the trust for the beneficiaries. Their specific duties may vary. For example, if a trust holds rental properties intended to be used for income, it will be the trustee’s legal duty to ensure those properties are managed and generating income. Or it may be the trustee’s duty to oversee a trust of investments, such as equities in a brokerage account.2
As an individual trustee, they are also personally liable for the success of the trust and are legally vulnerable if an interested party feels wronged.
How a corporate trustee can help
You may notice that we mentioned “legal duty” multiple times in the definition of a trustee. This role is a heavy lift for most individuals, as it bears much fiduciary responsibility, not to mention the weight of familial expectations and emotions. That is why some of your clients may feel more comfortable and secure with a corporate trustee.
A corporate trustee is a bank or specialized company that manages a trust. A corporate trustee is held to a higher standard and is required to act in the best interests of the beneficiaries as they carry out their responsibilities, which include funding the trust, managing assets, investing, paying bills, keeping records, distributing income and proceeds to beneficiaries, and filing tax returns and any other required reports.3
For some families, having a neutral, but expert, third party involved with their trust relieves a lot of stress. The corporate trustee has the experience and fiduciary knowledge that the family members may lack. No one family member is held legally responsible for fulfilling the duties of the trust, which helps to avoid drama and provide peace of mind.
Speaking with your clients about their estate plan
Too often, families have no idea that a corporate trustee option exists. They see the word “corporate” and assume that a “corporate trustee” isn’t relevant to their situation. This gap in knowledge is an opportunity for advisors to provide value to their clients.
In your quarterly or yearly meetings, ask to see your clients’ estate plans. Do they have one? What about other family members? Are they a designated trustee for another family member’s trust?
From a broader perspective, asking questions about estate planning is just one way to help increase your client’s overall financial wellness – and that’s a good practice, not only for the client’s wellbeing, but also for your business. Recent research shows a clear correlation between the delivery of financial wellness services to clients and:
- Revenue growth
- Higher levels of new business
- Higher levels of client satisfaction
Curious to know how well you are delivering financial wellness to your clients? Take the Intelligent Financial Life Advisor Practice Assessment. Your score will highlight areas that could be improved to help your clients, and your bottom line.
Deepen relationships with the next generation
Research has shown that 90% to 95% of offspring leave their parents’ advisors upon receiving their inheritance. More than half of advisors admit that they haven’t even reached out to the “next gens” of their clients and many advisors do not meet with anyone beyond a spouse in a family.4 Asking estate planning questions and teaching your clients about options like corporate trustees are great ways to deepen relationships and grow your book of business beyond one generation.
The Envestnet Trust Exchange, powered by Trucendent, offers access to a wide array of resources including corporate trustees services from Bok Financial Advisor Trust Services, Peak Trust Company and Sterling Trustees. Learn more about how Envestnet helps advisors to help their clients protect their legacy at https://www.envestnet.com/wealth-solutions.
- “2022 Estate Planning Study: Millennial Estate Planning Continues in a Pandemic,” Trust & Will, https://trustandwill.com/learn/millennial-estate-planning-study-2022
- Adam Barone, “What is a Trustee? Definition, Role, and Duties,” Investopedia.com, September 18, 2022, https://www.investopedia.com/terms/t/trustee.asp
- Michelle Kaminsky, “Understanding the Use of a Corporate Trustee in Estate Planning,” LegalZoom.com, May 2, 2022, https://www.legalzoom.com/articles/understanding-the-use-of-a-corporate-trustee-in-estate-planning
- Tracey Longo, “Will Your Clients’ Kids Freeze You Out?” Financial Advisor Magazine, February 1, 2019, https://www.fa-mag.com/news/will-your-clients–kids-freeze-you-out-42880.html
The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.
Envestnet is not a law firm and as such, does not provide legal or regulatory advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel as applicable. This material should not be construed as a recommendation or endorsement of any particular product, service, or firm.
The Envestnet Trust Services Exchange has been created in partnership with Trucendent, a provider of tools for enabling advisors to strengthen their understanding and use of trusts in estate planning. Envestnet is not a law firm and as such, does not provide legal or regulatory advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel as applicable. Envestnet, Inc. has a financial interest and occupies board of director positions in Trucendent.