United Bank & Trust Blog

Trust agreements are often created to achieve estate planning objectives, and to effectuate tax-advantaged charitable giving. Sometimes, the creator (“grantor”) of a trust agreement also assumes the role of its manager (“trustee”). In this regard, the grantor may name a family member or a friend as successor trustee in the event he or she can no longer serve in that role. Some may consider a corporate trustee to serve as successor. Regardless of who is named, it is always recommended to name a successor trustee in the event the initial trustee is no longer able or willing to serve. Deciding who to name as trustee is one of the most important decisions to be made when establishing a trust.

Why is it important to name a corporate trustee?

A corporate trustee offers specialized expertise, experience and objectivity, and continuity in administration.

Specialized Expertise. A trustee carries out the duties and obligations of a trust agreement. This agreement instructs the trustee who holds and manages property for the benefit of one or more named beneficiaries. In addition to the requirement of carrying out the expressed terms of the trust instrument, a trustee holds various other fiduciary duties by law. These duties include but are not limited to: acting as a prudent investor; regularly accounting and keeping beneficiaries informed; acting impartially among beneficiaries; defending the trust; remaining loyal; and avoiding conflicts of interest.

Corporate trustees offer expertise in administration, investment management, accounting, financial planning, and in carrying out all of the duties imposed on trustees under the law. Corporate fiduciaries hire individuals who hold advanced degrees and licenses and who spend their professional lives administering trusts. Furthermore, corporate trustees are typically financial institutions who are subject to regulatory oversight to ensure fiduciary responsibilities are carried out.

Experience and Objectivity. The trustee is in charge of stewarding trust assets for present and future trust beneficiaries. To that end, it is important to assure investment decisions are made prudently. It is equally as important to carefully weigh decisions about when and how distributions to beneficiaries will be made.

Challenges arise for individuals who are inexperienced with trust administration, unaware of the governing law, and who do not understand the fundamentals of investing. Administration can also become difficult or emotional when an individual trustee is too close to a personal situation, such as having to decide whether to make a distribution to a close family member or friend. A corporate trustee offers experience and objectivity in the execution of these matters.

Continuity in Administration. A corporate trustee offers continuity in a way that an individual cannot. Changing circumstances and factors beyond one’s control may mean the individual who was once thought of as best-suited to serve as trustee is no longer able or willing to serve. A corporate trustee is reliable because it remains in existence. This assures an uninterrupted and consistent administration. Even if a grantor wants to name an individual as an initial successor trustee, it is crucial to name a corporate trustee as a successor trustee somewhere in the line of trustee succession.

United Wealth Management Group is more than happy to serve as your successor trustee. We offer a team of expert portfolio managers, financial advisors, planners and trust administrators. The team includes well-credentialed and experienced experts ranging from Michigan-licensed attorneys, to a Certified Trust and Financial Advisor, Certified Financial Planners, and a Chartered Financial Analyst.

Contact us today to learn more about the benefits of our specialized trust services.

I recently did a financial plan for a client and was able to increase the amount of money she could expect to have throughout her retirement years by almost $100,000 – 29%. She could do this without increasing her expected investment returns, working longer, or decreasing her expenses.

How could she do it?
By contributing over 50% of her earned income to her 401(k) for the remaining three years before she retired. “How can I do that?” she asked, “I can’t live on only half my income!” The answer was to take money from a non-retirement investment portfolio she had inherited a few years ago. By taking monthly distributions from her investments to make up for the increased contributions, she could effectively shift money from a fully taxable account to her tax-deferred account. This will not only decrease her tax burden while she is still working, but will allow a greater portion of her investments to grow tax free until they are needed. The end result was almost $100,000 savings in income taxes she could expect to pay throughout her lifetime.

Thinking Outside the Box.
We all tend to compartmentalize our money into different boxes for different needs. This is usually a good money managing technique to make sure you have cash to pay certain expenses when they occur. If we are setting money aside in a Christmas fund, for example, we don’t want to take that money out for current expenses, or we won’t have enough to buy the gifts we want to purchase.
We often have separate accounts for our children’s education needs, taxes due at the end of the year, discretionary and non-discretionary expenses, and retirement. Dave Ramsey encourages us to take it one step further and allocate each paycheck into different boxes for different spending needs, allowing us to keep track of our expenses better and make sure we don’t overspend.
However, all this compartmentalizing can sometimes give us blinders to options that will increase our overall wealth, especially when it comes to tax planning. It may make sense to use money in one box to pay for expenses in a different box if the end result is lower taxes – as in my client’s situation. In the end, money is fungible, and any money can be spent on any need. The trick is to know when our compartmentalizing is helping us and when it is getting in the way of broader planning strategies. Sometimes it can help to have someone else review your finances to see if there is anything you have overlooked.

A good place to start is to have a formal financial plan done.
If you are interested in learning more about United’s Financial Planning Services, come to our complimentary learning sessions on March 20 or March 22.