Selecting a trustee is critical to ensure the right person or organization can adequately carry out your estate planning instructions and look out for the best interest of your beneficiaries. The following information will help you understand the responsibilities of a trustee so you can make a more educated decision when selecting a trustee.

What is a trustee?

A trustee holds title to property and administers that property (the trust assets) for the benefit of the trust beneficiaries.

A trustee can be:

• An individual like a trusted friend or family member. A professional like an attorney, accountant, or financial advisor can also serve as an individual trustee.

• An organization like a bank or trust company with fiduciary powers.

If you want to name multiple trustees, a co-trustee can be named to serve with one or more other trustees. Co-trusteeships can be formed between one or more individuals and may include a corporate trustee.

A successor trustee can also be named to assume the duties of a trustee who can no longer fulfill their obligations.

Generally, trustees must adhere to the terms outlined by the grantor in the trust document and abide by any relevant laws. Their actions should be performed in the best interest of the beneficiaries.

Responsibilities of a trustee may include:

• Distributing trust assets to beneficiaries pursuant to the terms of the trust document.

• Providing periodic trust accountings to beneficiaries.

• Managing the assets of the trust, including both investments and nonfinancial assets like real estate, business interests, or other personal property.

• Preparing and filing tax returns.

Why choose a corporate trustee like Commerce Trust?

Experience

Clients working with Commerce Trust have access to a team of specialists with years of experience in trust administration, investment management, and tax preparation. An individual trustee may lack the skills necessary to administer the trust or may not have a full understanding of the amount of time and level of effort involved.

“For an individual serving as a trustee, your perspective may be limited to the unique circumstances of that one specific trust. So, when an unfamiliar situation arises, you may not know how to handle it. A corporate trustee has probably seen something similar before and can draw on that experience.” – Jacqueline Gabbidon, J.D., LL.M (Taxation), CPWA^®, AEP^®, Texas Market Executive, Commerce Trust

Depth of Capabilities

Working with a trustee who has access to knowledgeable specialists can benefit the trust and its beneficiaries. Commerce Trust centralizes the trust management process and can resolve many matters in-house. A team of professionals manages the assets within the trust, which negates the need to shop around for individual tax or investment management specialists, providing convenience for clients that can streamline the administration of the trust.

“If you’re using an individual trustee… they may not be investment professionals and may not have access to the tools necessary for investing the trust assets. Most individual trustees are not going to have the investment experience necessary to administer the trust on their own. They’re going to have to hire a third-party investment manager,” says Jacqueline Gabbidon.

Responsibility

Corporate trustees like Commerce Trust are held to a higher standard than nonprofessional, individual trustees. Ensuring legal compliance is of great importance to a corporate trustee, as avoiding potential litigation is key to keeping the organization running smoothly. A trustee will be responsible for handling any possible legal issues relating to the trust, which could be a significant burden to bear for friends or family members serving as a trustee.

Objectivity

Personal dynamics could inadvertently compromise the objectivity required to fulfill the fiduciary duties associated with trust administration. An ideal trustee is supposed to act as a neutral third party focused solely on the interests of the beneficiaries, which may be difficult for individual trustees who have close personal relationships with beneficiaries. Family dynamics add another layer of complexity, leaving heirs potentially exposed to favoritism or unfair treatment. Corporate trustees can provide more objective and professional support by strictly following the terms outlined in the trust document and using unbiased discretion when necessary.

Succession and Continuity

Managing a trust is a long-term endeavor that involves detailed record-keeping and requires a high level of organization. If something happens to an individual trustee that prevents them from administering the trust, continuity could be lost. Successor trustees may be named to serve if the original trustee becomes indisposed, but there is no obligation for them to serve by the time their turn comes. A trustee’s willingness to serve is also a crucial element to consider. Designating a corporate trustee, such as Commerce Trust, ensures clients have a reliable representative for years to come.

Tailored Solutions for Trustee Selection

Selecting a trustee requires careful consideration. It is understandably overwhelming to address this important task on your own. At Commerce Trust, specialists can guide you through the trustee selection process to ensure you have a trustee that fits your unique objectives. Contact the Commerce Trust team today to learn more about our private wealth management services and how we can help you navigate trustee selection with confidence.

Investments & Wealth Institute™ (The Institute) is the owner of the certification marks "CPWA," and "Certified Private Wealth Advisor." Use of CPWA, and/or Certified Private Wealth Advisor signifies that the user has successfully completed The Institute's initial and ongoing credentialing requirements for wealth advisors.

The opinions and other information in the commentary are provided as of April 12, 2024. This summary is intended to provide general information only, and may be of value to the reader and audience.

This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such. 

Commerce Trust does not provide tax advice to customers unless engaged to do so. Commerce Trust does not provide legal advice to its customers. Consult an attorney for legal advice, including drafting and execution of estate planning documents.

Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Commerce Trust is a division of Commerce Bank.

Investment Products: Not FDIC Insured | May Lose Value | No Bank Guarantee