When does it make sense to ask a bank to serve as trustee or co-trustee of a family trust?

The term family trust could refer to any trust whose intended beneficiaries are family members of the person who sets up the trust.  That person is usually called the “settlor,” but the words grantor and trustor are also sometimes used.

There are many reasons for setting up a trust.  The most common is to provide for the transfer the settlor’s property at the time of his or her death.  In such cases, the trust basically takes the place of a will. 

Most settlors chose to make this type of trust revocable and name themselves as the initial trustee.  In such cases, the settlor continues to manage trust property, just as he managed it before setting up the trust, but only for as long as he is alive and has the capacity to serve as trustee. 

The big question is “who should succeed the settlor as trustee when the settlor dies or becomes incapacitated?”

A settlor normally names a successor trustee in the trust document, or gives someone else the power to select a successor trustee when the time comes.

Regardless of who’s making the decision, a bank trust department tends to be an excellent choice when the trust is relatively large or involves complicated legal issues.  A bank also makes sense when having a relative as trustee is likely to stir up controversy within the family, or when the trust is expected to last for many years after the settlor’s death.

There are many other potentially important considerations, but the bottom line is that bank trust officers generally bring experience, competence, and independence to the task. 

There are times, of course, when a family member of the settlor can reasonably be expected to perform effectively as trustee or co-trustee.  That may or may not save money.

People sometimes assume that only bank trustees charge fees.  In fact, any trustee is entitled to a fee—though family members sometimes agree in advance to waive a trustee fee.

Some settlors choose to set up an irrevocable trust while still living.  In such cases, there are usually limitations on the settlor’s ability to serve as trustee.  In such situations, most settlors will choose a bank or a family member, or a combination of the two, to serve as trustee from the beginning. 

The best choice is always whatever that settlor wants after understanding the available options. 

As always, I must add that this column does not contain legal advice, and that you should not rely on any of the above information to determine what is in your own best interest.  

Also, on a side note, this completes my first year of writing this column.  I have enjoyed responding to questions from our community.  Time flies when you are having fun.


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