While many people choose a family member or friend to serve as Successor Trustee for their Revocable Living Trust, this is not the only option. Especially for larger trusts, a better option might be to name an institution, such as a bank trust department or a trust company, as Successor Trustee. Why? There are several potential benefits.
First, although these institutions charge fees for their services, they also generally employ or have access to a variety of pre-screened experts to assist in managing your trust. A family member or friend may serve for free, but especially if your trust involves a large number or variety of assets, he or she will likely have to hire experts – from financial planners to tax advisors – to help with the job. And he or she may not choose the most qualified experts.
Also, an institutional trustee has the advantage of years of experience in managing a variety of trusts. An individual trustee is less likely to have this kind of experience and may be more prone to making mistakes, especially when it comes to handling complicated financial transactions.
One of the things an institutional trustee’s fees include is generally some type of professional insurance. So, if a mistake is made, your beneficiaries have recourse and can be compensated for any damage caused by a potential mistake.
Finally, an institutional trustee is a neutral third party who won’t be drawn into family conflict, or show undue favoritism to one beneficiary over another. On the other hand, an institutional fiduciary is likely less flexible and may be slower-acting than an individual trustee.
The size of your trust, the number of beneficiaries, and who your beneficiaries are – as well as the qualities of the potential individual trustees available to you - all have bearing on whether you select an institutional or an individual trustee.