Choosing a trustee to handle your estate is one of the most important decisions you’ll ever make. Trustees fall into two categories: corporate trustees and individual trustees.
Trustees have tremendous responsibilities, including managing the trust, managing assets, administering finances (including taxes), communicating with beneficiaries, maintaining legal compliance, and distributing the estate after the principal dies.
The decision around whether to choose a corporate or individual trustee should be made based on what’s best for the estate as a whole, rather than emotional or obligatory ties. Your estate planning attorney is a tremendous resource as you determine which type of trustee is best for securing the future of your estate plan.
ℹ️ What Does a Trustee Actually Do?
A trustee manages trust assets, files tax returns, communicates with beneficiaries, maintains legal compliance, and distributes the estate according to its terms. For larger or more complex estates, these responsibilities can require years of ongoing financial and legal judgment.
Pros & Cons of Choosing a Corporate Trustee Over an Individual
A corporate trustee is an entirely objective, professional entity with no stake in the estate beyond the contracted management fee. In most cases, corporate trustees are financial or trust administration institutions. That’s very different from an individual trustee, who has some type of personal relationship with the principal (the person(s) to whom the estate belongs).
All too often, people base the decision about who should be the trustee of their estate on outdated traditions or on how their parents or grandparents handled it. For example, many people choose the oldest child or the eldest son, regardless of whether or not the individual is up to the task.
There are pros and cons to each option, but the following provides a general outline of when it may be best to use a corporate trustee rather than an individual.
When to use a corporate trustee
There are several reasons why it may be best for you to use corporate trustee services rather than choosing an individual to do it.
You prioritize expertise
First and foremost, an individual trustee will never have more expertise and long-term experience in managing, administering, and distributing your estate plan than any corporate trustee. Just as we recommend working with an estate planning attorney rather than using DIY will or trust paperwork to minimize risk, choosing a corporate trustee guarantees your estate is administered with professional integrity. And, again, for many estates, the objective – rather than personal – relationship is the best way for the estate to be handled cleanly, and with the least amount of tension, upset, or stress.
The estate is significant and/or complex
The larger and more complex your estate is, the harder it is for most individuals to carry out the responsibilities of a trustee. If they are not able to handle the responsibilities, or they don’t have the knowledge or experience to manage the estate and related trusts, it leaves your estate vulnerable – and that may include significant tax penalties or other financial losses.
The estate includes minor children or other guardianships
Children and adults who require some form of guardianship are vulnerable. Even well-intentioned families can create stress, chaos, and emotional strain if an individual trustee is unable to maintain strong boundaries, communicate clearly, or carry out your wishes as intended.
Corporate trustees have no emotional ties or vested interests in the parties involved. By using a professional, institutional “authority,” there is far less chance that anyone in the family will challenge the will or complicate estate distribution matters.
You appreciate the freedom of choosing successors
Typically, estate plans are structured with a primary trustee and one or two named successors who assume responsibility if the primary trustee is unable to serve. This is to ensure that the estate plan remains soundly in place despite any unexpected (or inevitable) life events. If your individual trustees experience death, incapacitation, or challenging life situations, it can compromise the estate. However, corporate trustees are professional institutions – rather than individuals – the estate plan remains uncompromised.
You can trust that tax responsibilities are handled
Estate plans are subject to tax laws, and this can become complicated quickly. Ultimately, your heirs and beneficiaries suffer if tax discrepancies result in penalties or fines. It is virtually impossible to learn the complexities of estate law if you aren’t an estate planning professional or financial expert yourself.
If your estate lawyer has done the essential work to establish estate plans that protect heirs and beneficiaries using savvy tax strategies, honor their efforts (and your estate) by using a corporate trustee who can handle whatever changes or amendments are required over the years.
There are complicated family dynamics
Estates rarely sit inside tidy families. Blended households, half-siblings who barely know one another, an heir who feels shortchanged, a relative nursing an old grievance: any of these can turn an individual trustee into a referee nobody wants to be, because every distribution decision gets read through the lens of family history. A corporate trustee has no side to take. Decisions follow the trust document and the law, applied the same way to everyone, which keeps the personal target off the trustee and makes a will contest far less likely. If you already suspect your wishes might land hard with certain family members, naming a professional to carry them out can keep a hard moment from becoming a permanent rift.
⚠️ A Common Mistake
Naming a family member as trustee out of obligation or tradition, rather than capability, is one of the most frequent estate planning errors. If the person you choose lacks the time, financial knowledge, or emotional distance to manage the estate fairly, it can lead to costly mistakes, strained relationships, and even litigation.
Are there scenarios where you should use an individual trustee?
It’s almost always best to invest in a corporate trustee for large estates, complicated estates, or when family dynamics might compromise the goals of your will and trust with a personally selected trustee.
However, there are many situations in which individual trustees are well qualified to handle the responsibilities and potential complexities that arise.
Depending on your family dynamics, it can be a good idea to share certain parts of your estate plan with heirs and beneficiaries of your choice – even if you don’t want to share all of the details. Letting family/loved ones know you have an estate plan and letting them know who you’ve named as the trustee and successor trustee(s) early on can minimize issues when it’s time for the estate’s distributions to occur. Having a family meeting or two that include the trustee and successor trustees, easier than ever now that features such as Zoom, Google Meet, and WhatsApp exist, can be a good way to start creating the boundaries that will help things unfold as smoothly as possible after your death.
They are not a family member or close friend
Family members and close friends are more vulnerable to the heightened emotional states that trigger grieving loved ones, or anyone who is surprised by the estate plan’s bequeaths or inheritances when they don’t align with expectations.
However, an objective individual trustee, such as your family lawyer, estate planning attorney, or trusted financial advisor, can bring the objective expertise and professionalism required to navigate complex situations.
The person works as an attorney or in a relevant professional capacity
If you have a family friend or colleague who is an attorney, financial professional, or works in a related professional field, their expertise and professionalism are probably sufficient for the job. The fact that they have professional credentials may have a cooling effect on any potential drama, such as someone(s) who wants to contest the will or trust instructions.
It’s a small estate, and you want affordable long-term options
Smaller estates may not benefit from the additional fees and expenses associated with engaging corporate trustees. In this case, if you feel a professional would do a better job than a family member, friend, or trusted colleague, your estate attorney may be able to refer you to other professionals who may charge less than a corporate trustee.
Tseng Law Firm Helps Clients Determine The Best Estate Plan Trustee
Choosing the right trustee is a key cornerstone of solid estate plans that protect your family’s present and future goals. Depending on your trust and planning needs, it may be necessary to determine whether a corporate trustee would be a better option than an individual trustee choice.
This is just one of the many estate-planning decisions in which Tseng Law Firm becomes our clients’ trusted ally and partner. We help you weigh the pros and cons of a corporate trustee versus an individual trustee to ensure your legacy remains secure. Contact us to schedule an estate planning consultation.