In this issue I will discuss four of the reasons why a client might select a Corporate Trustee and three red flags to watch for during the selection process.

A Corporate Trustee, such as the Trust Division of Sandy Spring Bank, can be named in various Fiduciary roles.  They are often named as a Trustee in a Trust.  A client might select a Corporate Trustee in their Trusts for one or more of the following reasons:

1. Professional staff:  A Corporate Trustee will have on staff individuals with experience in investments, taxes and law.  Professional expertise can prove invaluable with more complicated trust administration duties.  The Trust Company can also work closely with the client’s attorney and accountant.

2. Objectivity:  A Corporate Trustee will follow the client’s directions in the legal documents and will not let personal emotions or prejudices get in the way.  It can be very hard for a child to be a Trustee over a sibling’s assets that are protected in a Trust. 

3.  Continuity:  Trusts can continue for many years and even generations.  A Corporate Trustee can provide Fiduciary services for children, grandchildren, great grandchildren, etc. An individual trustee would have to hand over the role and may face periods of illness or incapacity.   

4. Unable to find an appropriate individual trustee:  A client might turn to a Bank if they do not have children, do not wish to pick one child over another or do not wish to burden a child with the role of Trustee.  Ensuring competence in the areas of law, tax, investments, estate strategies and trust administration is another reason for turning to a Corporate Trustee.   

Once a decision has been made to name a Corporate Trustee, the next step is to select the appropriate Trustee.  Here are three red flags – specific things the client should look for in the selection process. 

1.  Experience.  A Corporate Trustee is only as good as its staff.  A client wants to look at the experience levels of the Professional Portfolio Managers responsible for the managing of the trust assets and the Trust Officers who will handle the Trust Administration duties.   

2.  Turnover.  High turnover in the staff of the Trust Company is a big concern – Trust Administration is a very personal, interactive relationship that is upset or even damaged by changes in points of contact. 

3.  Proprietary mutual funds.  Many Trust Companies use in-house proprietary mutual funds as a primary investment vehicle.  Use of these types of funds increases profitability by retaining all fees and service income for the institution.  The use of propriety funds also increases institutional profitability because fewer portfolio managers are required to oversee external funds.  A client should know how the Trust assets will be managed and if a Portfolio Manager will be assigned directly to the account. 

A Corporate Trustee can provide wonderful services to a client in the right situation.  If you would like to learn more about Trust Services and how Sandy Spring Bank has addressed all of the above concerns, feel free to contact me at 301-785-4112 or at pfish@sandyspringbank.com.