Appointing a corporate estate trustee instead of a family member

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Hiring a corporate trustee to administer an estate rather than appointing an individual family member to the role is more expensive, but it can remove burdensome tasks and tensions, two experts said.

Financial advisors often play a crucial part in estate planning. They oversee the investment portfolios and other assets that deceased clients hand down to beneficiaries, and they manage the tax exposure ahead of time. The “great wealth transfer” of an estimated $72 trillion by 2045 displays the business stakes of estate planning for advisors and the industry.

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Clients and their heirs may find value in assigning a professional trustee instead of leaning on one of the beneficiaries to handle the often lengthy and frequently stressful process of distributing an estate’s assets, according to Theresa de Leon, the national director of sales for Arden Trust, a Kestra Holdings company, and Ari Brojde, founder of estate and trust administration software firm Estateably. An advisor hired to be the trustee on behalf of a family or work for them through the process in other capacities could also boost their chances to retain clients across generations, de Leon and Brojde said.

“It makes a lot of sense to have a trustee,” de Leon said. “People tell me all the time that they’re families are well-adjusted, they get along. That’s always true until it’s not.”

Passing a significant estate’s assets to the next generations often takes 500 hours of administrative work led by the trustee, according to Brojde, whose company’s estate and trust tools have helped 1,000 professional services firms, including some of North America’s largest financial institutions, transfer $10 billion to heirs since launching in 2021. Courts hold professional trustees accountable to the highest fiduciary duty, and using a professional can ensure none of the beneficiaries find themselves liable in a legal case for any mistakes. It can also avoid the thorny scenario in which a trustee refuses to act on the terms of an estate’s will, he noted.

“First and foremost, they come with a wealth of experience. There’s a tremendous amount of work that needs to go into administering a trust, and I’m not sure that everyone is aware of the type of work that needs to go into it,” Brojde said. “You’ll be getting the expertise that is required for the job.”

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The trustee gig covers areas such as accounting, distributions, income-tax documents, investment monitoring and any number of needs associated with trust, which “are all things that the average person doesn’t have much expertise with,” he noted. In addition, a professional will bring more objectivity to dicey conversations that may otherwise devolve into accusations that the executor is “favoring one beneficiary over the other.” A professional will also have access to technology through Estateably and other fintech firms that make the process easier, Brojde said.

“When you’re part of a corporate trustee, you’re going to invest in technology that makes estate planning more efficient,” he said. “The families that hire corporate trustees that are investing in technology, they have a better user experience.” 

Using a professional trustee can improve the process for clients with complex family dynamics,  such as an estate divided among three siblings, one of whom would otherwise be appointed as the trustee, de Leon said. An outside corporate trustee can deal with the “constant calls and pleas” from other heirs by reminding them, “Here’s what the trust allows, and the answer is you can’t have any more than that,” she noted. 

Her firm often comes into the process late, taking over for a family member who was previously stuck trying to handle not only the trustee work but also pressure from their relatives.  

“Of course, what happens is there’s immediate conflict because that person is in the unenviable position of having to say no to certain requests,” de Leon said. “It creates additional tension within the family that you wouldn’t otherwise have.”

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