Don’t confuse the desire to distribute assets in equal shares to family members to giving those same family members control over those assets in the event of your disability or death. Using corporate trustees can often provide better results.
Many clients choose to name the eldest child as decision-maker and the other children in birth-order or by gender. This is done without regard the following issues:
A younger child is more capable of managing money.
The younger child is geographically closer to handle the day-to-day management of assets. The out-of-state child will have to incur considerable expense and disruption of his/her career as the management of the parent’s assets require more and more attention.
The child that is serving as trustee may be in denial about his/her ability to manage complex assets or may be ill or injured and in denial about their physical or mental condition to properly manage assets.
The child may become distracted by events in his/her own life: career issues, mid-life crises, problem relating to marriage or the raising of their own family or he/she wants to enjoy their own retirement including travel) and not be tied to paying bills and someone else’s accounts.
There may be a lack of harmony or hidden agendas by the child that a neutral manager could help to avoid. For example, many wills and trusts allow for great discretion allowing the child as trustee to guarantee the receipt of the better assets of an estate while distributing less valuable assets to others.
Children (unless it is part of their business/career) do not fully understand fiduciary and prudent investor rules.
There are many other examples but the point that needs to be considered is that any one of these issues can put your assets at risk.
A common misconception is that corporate trustees will diminish an estate; however the opposite is often true. Corporate trustees can actually increase the size of an estate rather than deplete it.
As clients age their investments tend to become more risk averse and may only match economic inflation or may lose value due to inflation. Corporate trustees understand portfolio theory and can put it into action reducing risk while obtaining a higher rate of growth. In other words, they can more than pay for their work.
Corporate trustees often charge less than the statutory fees provided under a conservatorship or probate.
Corporate trustees understand the meaning of the Prudent Investor Rule when it manages investments and what it means to be a fiduciary.
Children or other individuals may find that their vacation and career plans have to be put on hold or they experience significant problems if they become ill or injured; issues that take their attention away from the proper management of wealth expected of them. Corporate trustees owe a duty of loyalty to their clients and have in-house back-up managers for those very issues.