• Vincent Chambers, Esq.

10 Questions to Ask When Interviewing a Corporate Trustee or Professional Fiduciary

First off, what is a corporate trustee, and what is a professional fiduciary? A corporate trustee (or trust company) is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business for the purpose of administration, management, and the eventual transfer of assets to a beneficial party. [i] A professional fiduciary is an individual who acts on behalf of another person and can serve in various capacities, such as trustee, business manager, decision-maker, or guardian. [ii] In the context of this post, we’re exploring the professional fiduciary in the capacity of trustee. For additional context on professional fiduciaries, check out the Professional Fiduciaries Bureau, the regulatory agency which manages fiduciaries in California. [iii]


Why Would I Need to Interview a Corporate Trustee or Professional Fiduciary?

Using a corporate trustee or a professional fiduciary may be necessary for instances where the person who establishes a trust does not have a responsible family member or friend who can serve in this role to administrate the estate. On the other hand, if you do plan to name someone you know (such as your child) as trustee of your estate and/or executor of your will, be sure to review our previous post for some insight. [iv]


If you find yourself in a position where you need the services of a corporate trustee or a professional fiduciary, here are 10 questions you can ask to help make your decision (along with a bit of commentary).


Questions for Corporate Trustee or Professional Fiduciary

1. What are the fees for your services?

  • Get a detailed breakdown of how the billing model works so you know exactly what you can expect to pay.

  • Typically, corporate trustees charge between 0.25% and 2% of the trust assets per year.

  • Professional fiduciaries typically charge an hourly rate. You can likely expect to pay at least $100/hr in California.


2. How is your business structured to administrate my estate?

  • Get an understanding of the operational structure of the corporate trustee or professional fiduciary in terms of support staff and the various individual(s) who will be involved in carrying out your wishes.

  • A good follow-up for corporate trustees is whether there will be a single individual or point-of-contact dedicated to your estate.


3. What is your experience administrating an estate where minor children are the beneficiaries?

  • In this instance, the trustee will need to work with whoever may be the guardian(s) of the children and their estates.


4. Do you have experience working with family members who may have strong/difficult personalities?

  • Evaluate whoever you are speaking with to get a feel for their personality and whether they are someone you would feel comfortable handling your estate.

  • Find someone who will treat your beneficiaries fairly and remain objective.


5. How will distributions to beneficiaries be handled, and will the beneficiaries be able to contact you easily?



6. Do you have a succession plan?

  • A succession plan lays out what will happen if the named trustee is unavailable or incapable of handling your estate when the time arises. Since corporate trustees typically have teams of people working on various estates, and you’d be naming the trust company as trustee (and not an individual), this question is more apt for individual professional fiduciaries.

  • If you are naming an individual fiduciary, get a clear understanding of what will happen if that individual is not able to serve. The fiduciary may have a plan for someone else to take over in their absence. You should know precisely what the fiduciary has planned and determine whether it is acceptable to you. If not, you could consider adding language to your trust to address this. For instance, if the specific individual you name as trustee is unavailable, you could state that their succession plan (whatever it may be) is inapplicable, and you elect to have your second successor trustee (the next in line) handle your estate instead.


7. Do you have experience working with other professionals to administrate my estate effectively?

  • Get a sense of who the trustee has worked with in the past or who they may have as part of their staff (attorneys, CPAs, financial advisors, insurance agents, etc.).


8. What are some of the hurdles and problems you’ve encountered while serving as a trustee, and how did you work through those issues?


9. If any of my assets require a probate proceeding, how would that be handled?


10. In general, ask questions that are specific to your estate. A few potential topics:

  • Whether a special needs trust will be involved.

  • Your ownership of a business.

  • Pets or animals that need care.

  • The size of your particular estate.

  • Whether they have experience with the specific types of assets you own: retirement accounts, real estate, rental properties, oil and gas rights, intellectual property, cryptocurrency, etc.


Final Thoughts

The selection of a trustee is a significant decision. You should always trust your gut instincts on whether the potential company or individual will be a good fit for you. If it doesn’t feel right, keep on searching. No matter what you may be feeling, keep in mind that in building your wealth, you’ve likely accumulated a great deal of wisdom as well. Although the trustee selection process may seem daunting, you should feel empowered on the journey. If all goes well, the right person will carry out your exact wishes, and your legacy will endure.


Your estate plan and your financial situation are inextricably intertwined. Please do not hesitate to contact us with any questions you may have as you navigate this process.


Disclosures: This information should not be construed as investment, tax, or legal advice.

 

i. https://www.investopedia.com/terms/t/trustcompany.asp

ii. https://pfac-pro.org/find-a-fiduciary/role-of-a-fiduciary/

iii. https://www.fiduciary.ca.gov/

iv. https://www.sherwoodfp.com/post/will-your-children-need-help-executing-your-will

66 views

Sherwood Financial Partners, LLC is a registered investment adviser. Sherwood Financial Partners, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Principal value and investment return will fluctuate. There are no implied guarantees or assurances that the target returns will be achieved or objectives will be met. Future returns may differ significantly from past returns due to many different factors. Investments involve risk and the possibility of loss of principal.

 

Case studies presented are based on actual clients, however, some of the information may have been changed or altered. These studies are provided for educational purposes only. Similar, or even positive results, cannot be guaranteed. Each client has their own unique set of circumstances so products and strategies may not be suitable for all people. Please consult with a qualified professional before implementing any strategy discussed herein. No portion of these case studies is to be interpreted as a testimonial or endorsement of the firm's investment advisory services.

 

Sherwood Financial Partners, LLC may discuss and display, charts, graphs, formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions.