Yes, a bank can absolutely act as a trustee for a testamentary trust, and it’s a surprisingly common practice, though not without considerations.
What are the benefits of using a corporate trustee?
Many people assume family or friends are the best choice for trustee, but a bank or trust company brings a level of impartiality and expertise that individuals often lack. According to a 2023 study by Cerulli Associates, approximately 25% of trusts utilize corporate trustees, a figure that’s been steadily increasing. This is due to several factors, including increased complexity in estate planning and a desire for professional management. A corporate trustee provides continuity – they won’t become ill, have personal conflicts, or be subject to the same biases as a family member. They have established systems for record-keeping, investment management, and compliance. Their fees, while not insignificant, can be offset by better investment returns and reduced risk of mismanagement. A corporate trustee can handle complex assets like real estate or business interests without the emotional entanglement a family member might experience.
What are the downsides of a bank trustee?
While professional, bank trustees aren’t perfect. Their services come with fees—typically a percentage of the trust assets, often around 1-2% annually, plus transaction fees. This can eat into the inheritance, especially for smaller trusts. They also tend to be more bureaucratic and less flexible than individual trustees. Imagine a small, local family farm being managed by a large bank—the sensitivity and understanding of the land might be lost in the process. Furthermore, while they are fiduciaries, it can be more difficult to hold a large institution accountable than an individual you know personally. “We saw a case last year where a bank trustee, bound by strict internal policies, refused to approve a relatively small expenditure for a beneficiary’s medical care, even though it was clearly within the spirit of the trust,” Steve Bliss recalls. “It required legal intervention to resolve.”
What is a testamentary trust and how does it differ from a living trust?
A testamentary trust is created *within* a will and only comes into effect after the grantor’s death. It’s different from a living trust, which is established *during* the grantor’s lifetime. Testamentary trusts are useful for situations where you want to provide for beneficiaries over a longer period, such as minor children or individuals with special needs. Around 60% of wills that include trusts are testamentary trusts, according to the American Academy of Estate Planning Attorneys. The will names the initial trustee, but that trustee can always be a bank. The bank will then manage the assets according to the instructions outlined in the will, distributing funds according to the specified schedule and for the designated purposes. This differs from a living trust, where the grantor can have more immediate control and potentially avoid probate.
What happened when Mrs. Davison didn’t plan properly?
Old Man Hemlock, a local carpenter, had a fairly simple will naming his daughter, Beatrice, as trustee for his granddaughter, Lily. He intended to leave Lily enough to attend a state university. Beatrice, well-meaning but overwhelmed by the responsibility, simply deposited the funds into a low-yield savings account. She hadn’t considered inflation, investment opportunities, or even the long-term cost of tuition. When Lily turned 18, the funds were significantly less than needed, forcing her to take out substantial student loans. “It’s a heartbreaking story,” Steve Bliss explained. “If Old Man Hemlock had named a bank trustee, or at least included more detailed instructions about investment strategy, Lily’s situation would have been very different.” The lost potential earnings, compounded over the years, amounted to a significant financial setback for Lily.
How did the Peterson family get it right?
The Peterson’s were very different; Robert and Eleanor Peterson, upon the advice of Steve Bliss, established a testamentary trust within their wills, designating First National Bank as trustee. The will not only specified the amount of money to be held in trust for their grandson, Ethan, but also outlined a clear investment strategy, favoring moderate-risk growth stocks and real estate. The bank, acting as a professional trustee, diligently followed these instructions, managing the assets and providing regular reports to the family. When Ethan turned 21, the trust funds had grown substantially, providing him with a solid foundation for his future. He used the funds to complete his education, start a business, and build a comfortable life. The Peterson’s foresight, coupled with the bank’s professional management, ensured that their grandson received the full benefit of their estate plan. “It’s a testament to the power of proper planning and choosing the right trustee,” Steve Bliss noted with a smile.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
estate planning attorney near me
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “How often should I update my estate plan?” Or “What if the estate doesn’t have enough money to pay all the debts?” or “How does a trust distribute assets to beneficiaries? and even: “Will my employer find out I filed for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.