If you are unhappy with trust management fees, good news: you have options for choosing a trustee. Your specific situation may warrant a trustee with a different fee structure than you have now. Possible options for trustees include a trust management company, individual trustee, beneficiary as trustee, multiple trustees, or professional trustee. To learn more about changing the trustee of a trust or finding the best type of trustee, you should seek legal advice.
Trust Management Company
Many trusts are overseen by trust management companies or the trust departments of banks. Trust management companies operate as the trustees of trusts, meaning they are the fiduciaries who oversee trust operations. They are responsible for investing and managing trust assets for the benefit of beneficiaries. The same is true of trust departments of banks.
Some trust settlors choose trust management companies for their trusts because they have experience and expertise. They manage hundreds or thousands of trusts, so they must know what they’re doing – right? The upside to choosing a trust management company also is its downside. Because trust management companies have experience and knowledge, they can justify charging expensive trust management fees. These fees get paid out of trust assets, diminishing the pot of money available to beneficiaries over time. That is why some people opt for different types of trustees.
People forming living trusts or smaller family trusts often select an individual trustee, such as a trusted friend or family member. If a trust is straightforward and includes a limited number of basic asset types, this may work out well. Friends and family are a known quantity and already have a close relationship with the trust settlor.
However, friends and family may not have the knowledge or background to manage complex trusts. For example, some trusts include real estate that requires management. Others have large portfolios of assets that must be invested prudently. Individual trustees may need the assistance of professionals such as financial advisors to meet their fiduciary duties. These professionals cost money to employ.
Beneficiary as Trustee
Settlors forming specific types of trusts may want to appoint a beneficiary as the trustee. Like appointing a friend or family member, appointing a beneficiary has a great upside. The settlor already knows and trusts the beneficiary. In addition, a beneficiary has an interest in making sure that the trust runs smoothly – it will benefit him in the future.
The downside to appointing a beneficiary is the potential for conflict. If a single beneficiary of several is appointed, the other beneficiaries may feel disappointed or left out. There may even be a conflict of interest if the trustee-beneficiary makes decisions that only benefit him, not other beneficiaries. Moreover, beneficiary as trustee could limit the asset protection benefits of some types of trusts.
Some settlors may appoint multiple trustees to run a trust. While this might be done with good intentions, it actually can create more conflicts than it solves. For example, the trustees may disagree about decision-making. They might have different views on how to best invest trust assets or when to make optional distributions to beneficiaries. If there are an even number of trustees, there must be a tie-breaking method.
Selecting a professional trustee is one option favored by many settlors. The term “professional trustee” may refer to a licensed professional who oversees trusts on a regular basis. For example, the National Association of Certified Financial Fiduciaries licenses private individuals to administer trusts. To obtain a license, you must be a financial professional such as an accountant, insurance provider, or financial advisor.
In addition, the term “professional trustee” may include lawyers, financial planners, and other fiduciaries who act as trustees for some clients. These people may act as trustees as well as accepting clients for other matters.
Like trust management companies, professional trustees are not the least expensive option for a trust. However, they do come with relevant knowledge and experience managing trusts, which you may need moving forward.
Worried About Trust Management Fees? Reach Out for Advice
At Henke & Williams, LLP, we hear your concerns about trust management fees. Luckily, there are different options for managing your trust. As experienced Houston lawyers, we help our clients find the best solutions possible for their individual situations. Find out more about our services today. To set up a consultation, call 713-940-4500 or use our convenient Contact Form.