Searching for a Trustee that Fits your Needs

(Note: Kemp Stickney of Kemp C. Stickney & Co., a fiduciary consulting firm, and Norb Vonnegut of Second Opinion Wealth Management, an advisory boutique, suggest the following questions as a starting point to identify the right trustee for your family’s unique financial needs.)

Many firms are willing to serve as trustees, so it is important to understand whether they have the right capabilities and level of expertise necessary to administer your trust successfully. Size matters too. Trustees have different business models, and clients who are either too big or too small for a firm’s business model will inevitably feel they are not receiving the appropriate service.

Below are some questions designed to help you find a trustee that fits your needs. We offer them as a starting point (rather than an exhaustive list) to help you make informed decisions. Due diligence upfront and discussions with your trusted professionals often prevent serious mistakes down the road. As always consult with your trusted advisor before making a major decision.

Firm Background

Before meeting with firms, it helps to do your homework. You will save time by eliminating organizations that do not fit your needs. For those that make the cut, face-to-face meetings give you an opportunity to kick the tires and ask better questions. Here are several thought starters for your research:

How long has the trust company been administering trusts, what types of trusts, and how do they staff their client relationship teams?
What do the trustee fees include? Are there any expenses you should expect to pay beyond these fees?
How is investment performance reported, before or after fees?
Can you access information online? And are there any demonstration models available for you to see? Some online capabilities are rudimentary, while others offer real insight for performance reviews.
What other services are available? Bill paying? Estate settlement? Investment management?

Once you satisfy yourself the trustee can administer your trust, then we recommend that you interview the client relationship team to get a sense of how they will interact with you and your family. Ask for a couple of client references and talk to them about their experiences.

Questions for Client Relationship Teams

Why did you become a professional trustee?
What are your qualifications for making fiduciary and/or investment-management decisions?
What kind of special training do you have to serve as Trustee?
How many years have you been a trustee? What do you enjoy most about working as a trustee?
How many relationships do you manage? What is the average number of trusts that you and your team administer? (The number of accounts might be a leading indicator of what kind of service you can reasonably expect.)
What kind of trusts do you administer? (Obviously, it is best to have someone who is familiar with the kind of trust you have.)
What kind of trust-administration situations give you the most trouble? Do you see any potential issues with my trust?

Organizational Structure

Do you have an organizational chart that explains the role of each person on your relationship team?
Who will be my point of contact?
How long does it normally take to respond to an inquiry?
Are there others on your team who will be familiar with my needs?
What was the average staff turnover on your team during the past 5 years?
What happens to my account if your firm is acquired?
How are potential conflicts of interest managed? Do you use proprietary managers or funds? Are you or members of your team compensated for directing me to products or services? Is this compensation disclosed to me somewhere? And if there are changes in compensation going forward, what are your practices for notifying me about the ensuing conflicts if any?

Special Needs

A Special Needs Trust requires an extra level of due diligence. Some firms do not accept them. Others only accept them under very specific circumstances like the total amount of assets necessary to exceed a minimum threshold. Now is the time to ask questions about what experience the trust company has and how it will interact with either the beneficiary or your family.

Is this kind of trust a specialty of your firm?
How big is the team that will administer it?
Do you work with third-party firms to administer trusts with needs like mine? Who are they? What do they provide and what costs are associated with their services?

Investment Decisions

Do you manage and administer “direction trusts,” and if so, what are the specific requirements? Is there a fee difference between a simple direction trust and a complex one?
If you have investment responsibility, what is the process and communication?
Who is responsible for identifying and selecting appropriate investments for my trust?
Do you use passive managers, active managers, or a combination of both?
If you use active managers, how do you monitor their performance?
What turnover have you had with your active managers.
How has their performance compared to their benchmarks net of fees?
What is your internal process for reviewing the assets in my trust? How often should I expect communications about investments held in my trust? Will I be able to speak to the investment manager directly?
Who on the client relationship team is responsible to coordinate trust taxes, personal tax information and investment management decisions if it isn’t the investment manager?

Beneficiaries

How do beneficiaries request discretionary or nonstandard remittances or distributions?
How does your firm evaluate discretionary requests? Does your team have a $ amount that you can approve before such requests go to the Discretionary Committee for approval?
What information must I provide to make a discretionary request?
What about a loan from the trust?
For trusts with different classes of beneficiaries: How do you manage potential disparities in the amounts distributed or conflict among the beneficiaries?
Describe a situation in which you disappointed a beneficiary and how you resolved it.
How do you handle emergencies — like a time sensitive need for money? What are your normal turnaround times?
What are your precautions and security protocols for wire/ money-transfer requests to ensure they are legitimate?
As a beneficiary, what information should I expect to receive from you?
If a distribution requires the sale of an asset, how is that information communicated to make certain everyone understands the tax implications and timing?

On-boarding

Congratulations, you’ve won my business!

Now tell what I should expect and how long it might take for you to start moving the assets. What should I expect about frequency of meetings, sample statements, letters, and other information?
How do you communicate size and frequency of distributions?
If a family member is a co-trustee, how does he or she participate in the decision-making process?
How are disputes typically resolved if there is an error or a mistake?

Termination

Most trusts have resignation or removal language in the document. Some require an accounting, court approval, or the appointment of a successor trustee before the existing one can resign. Knowing what needs to happen in advance will save you a lot of aggravation.

Discuss what happens if you become unhappy with the Trustee and want to move the trust. You might want to get the trustee to agree to the removal process in writing in advance of you awarding them the trust business and them accepting it.

After you have done your due diligence and checked references it makes sense to discuss what you have learned with your lawyer and other trusted advisors so that they can react to what you have learned in the process and give you the benefit of their experience and advise you specifically on the terms of the document and what you can do or not do.

This article is provided for informational purposes only and should not be considered tax or legal advice. Kemp C. Stickney & Co., Second Opinion Wealth Management, and their representatives do not provide such advice.