Those fortunate enough to be beneficiaries of a trust provided by generous predecessors sometimes may not feel so fortunate when dealing with their corporate trustee services. Often beneficiaries have little or no say in the management and direction of the investment decisions and less to say about the fees and costs.
Thirty-nine states have now approved some form of Personal Settlement Agreement (PSA). The PSA allows the beneficiaries of the trust to petition the court to change the corporate trustee. Allowing beneficiaries to make this transition enables them to separate two vital functions of a trust: 1) Trust administration; and, 2) Investment and fiduciary management of the assets in the trust. Oftentimes existing corporate trustees serve both functions and create a potential for conflict of interest and inefficiency.
By separating these critical functions the beneficiaries are allowed to hire and fire based on what best serves the interests of the trust and the beneficiaries. Grantors also can be served in advance by separating these roles. Often a lifelong advisor is removed from a consultative relationship at the death of the grantor when assets are moved to an irrevocable trust with a named trustee. Many times the family has no relationship with anyone at the trust company and their advisor is helpless to assist.
A Donor Advised Trust addresses these problems effectively. The donor advised trust allows grantors or beneficiaries to select independent corporate trustees to handle the administration and names an investment advisor or firm to oversee the financial planning and investments. These features can be written into the trust in advance. They can be applied by beneficiaries afterwards now in many states via the PSA.
The greatest advantage is the ability to have enhanced transparency and communications. The grantors and beneficiaries have a say in some of the important matters of the business of the trust. If you have an interest in whether this could benefit you, allow our office to connect you with some experts in the field who can answer your questions.