Naturally, costs accrue when hiring outside help. Diane E. Lederman, senior vice president and head of wealth planning at New York-based Neuberger Berman, notes that while trustee fees are tax deductible, third-party fees paid to advisors hired by the trustee are not. FitzPatrick adds to this fact the argument that having all experts under one roof can be more economical in the long run. "Even if an individual would do it for nothing," he says, "the costs of those a la carte services can add up to be more than a corporate trustee, which would offer those services in a package." Typically, corporate trustees charge 1.25 percent to 1.5 percent of assets under management.
Succession and Service
Though an individual is able and willing to serve as a trustee, proponents of the corporate trustee point out further existing downsides—chief among them the issue of succession. Guernsey notes that "80 percent of the time, an individual trustee is a college friend, current lawyer or current family member. But the college roommate may die before you do."
| "[A trust] tells you what someone can
and cannot do. And sometimes the trust may say some horrible things." |
In addition to their exemption from the mortal lifespan of the individual, corporate trustees remain subject to more rigorous oversight and significant liability concerns. Corporate trustees are regularly audited and examined, theoretically reducing the chance of their making mistakes or committing fraud. Such safeguards do not exist for individual trustees. Also, if malfeasance or costly errors occur, a corporate fiduciary, rather than an individual, generally has deeper pockets to reimburse a trust if necessary.
Service, on the other hand, concerns many of us when considering the hire of a corporate trustee. At many trust operations, the high client turnover and long client list managed by many trust officers leads to lackluster service. "In my experience, for my clients, it has been an almost universally negative experience," says Joel Ticknor, a financial planner in Reston, Va. "There is no personal service, the fees are high, and you can’t make adjustments. Smaller clients especially just don’t rate the TLC. You’re better off with a trusted family member or friend."
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