Here at Altfest, we have a corporate trustee solution available for clients seeking an established company to serve as a trustee, co-trustee or even successor trustee for their trust.

What exactly is a corporate trustee?

In a common personal trust structure, one may choose to act as the trustee alone, appoint a reliable family member/friend or engage an established corporation. Traditionally, this corporation would act both as the trustee and investment manager, in a high-priced “bundled” solution. With the passage of the Uniform Prudent Investor Act of 1995 and the development of more-flexible trust laws in many states, a trust can now split the responsibilities. For example, a trust document can now stipulate not only the trustee, but also a separate company, as being responsible for the trust’s administration. A separate “preferred” investment manager can also be specified.

Using the corporate trustee solution, Altfest has the ability to act as the investment advisor for a trust at the same time an outside company administers the trust and acts as trustee.

Here are some key benefits of using an independent trust company — in partnership with Altfest’s services — as a trustee instead of the trust division of a large private bank:

1. Lower Minimum Assets and Fees
Independent trust companies likely will have lower minimum fees than most private banks. Additionally, the total cost of trust management can be less due to the bifurcation of trust responsibilities, increased negotiation power and use of a low-cost custodian platform.

2. Objective Advice
By having these duties separated — sometimes referred to as “directed” or “delegated” — clients can feel comfortable that an experienced professional is responsible for duties in which they specialize. In this case, the Altfest financial advisor would be responsible for the investments and asset allocation, while an independent trust company could act as a trustee, handling the administrative duties such as making distributions, filing tax returns and performing trust accounting in compliance with state law.

Typically, private banks will only serve as a corporate trustee if they are also enlisted as the investment manager. However, this could lead to a conflict of interest because the bank does not have an incentive to keep investment costs low and may prefer to choose its own proprietary investment products over potentially better-performing ones.

3. Investment Flexibility
Traditionally, a private bank would act as a “one-stop shop” and offer limited investment options. The grantor (the party creating the trust, often our client) would be constrained by the proprietary, high-fee investment products of large banks. In a directed trust, clients have the freedom to choose their own advisor, one like Altfest with access to an almost-unlimited number of investment options.

4. Peace of Mind
When the corporate trustee assumes much of the administration, greater peace of mind for the grantor results. Many individuals lack the experience to serve as trustee, leading to headaches and even potential future liability. A corporate trustee will not be biased in the administration of your trust, become incapacitated or find a true love and move to Paris on a whim.

How do you know if this arrangement is right for you? And how would it work?

Consider, for example, potential future family conflicts in making your decision whether to hire a corporate trustee. A corporate trustee will adhere objectively to your wishes identified in your trust document, while acting as a decision maker in any disputes. You might think over hiring a corporate trustee to act as a co-trustee with a family member or friend. If your trust is complex or very large, you should consider a corporate trustee as a viable option to reduce the liability that comes with acting as a trustee (or fiduciary). Additionally, if you have a trust managed outside Altfest and have been told it is “immovable,” we can help you determine if that is true. The trust company may simply be afraid of losing your business.

How Does It Work?
The trust language (possibly in your will) would need to designate a corporate trustee as the current or successor trustee. Every trust is different, and your situation can be evaluated, at no cost, by the independent trust company. We currently have experience with two, Schwab Trust and BOK Financial Trust Services. Both are backed by large, established corporate parents, and each provides personal corporate trustee services at a reasonable cost. Unlike private banks, we are not limited to these two companies and instead utilize an “open architecture” approach: We can help determine the best trust company for you considering factors such as cost, location, and the various special services each offers.

When the managed trust is up and running, Altfest would still act as your preferred communication channel.

If you would like more information about whether a corporate trustee is right for you and your estate planning needs, feel free to give us a call.

 

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Ryan Graham is a Financial Advisor at Altfest. Ryan works with clients and their families to develop and implement financial plans designed to achieve their personal and financial goals. He holds the CFA and CFP® designations. He is a member of the CFA Institute and CFA Society New York.

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