When it comes to naming fiduciaries, many people find it difficult to choose among their children or other people such as siblings and friends. Still others don't believe that any of their family members or friends are capable of serving, or their children are still minors and legally can't serve. In these situations, an institutional or corporate fiduciary, such as a bank or independent trust company, may be the best choice. Below is a list of the pros and cons of choosing an institutional fiduciary.
- Expert management - Institutional fiduciaries are pros at what they do. They'll have multiple staff members with many years of experience in dealing with the probate of estates and the administration of trusts and guardianship accounts. This, in turn, will lead to expert management and investment services.
- Neutrality - An institution will have no immediate ties to your beneficiaries, which will remove all of the emotional stress and strain that a family member or friend could be subjected to when serving as your fiduciary. Aside from this, the institution won't be biased by a beneficiary's past choices or present lifestyle and will simply administer the estate, trust, or guardianship as provided by the explicit terms of your Last Will and Testament or Revocable Living Trust and applicable state law.
- One stop shop - An institutional fiduciary should have all of the resources available to manage, invest, account for, and spend your estate, trust, or guardianship assets under one roof. This will include investment services, brokerage services, accounting services, real estate management services, and legal services. On the other hand, individual fiduciaries will be required to hire multiple professionals to oversee all of the aspects of the administration of your estate, trust, or guardianship. For example, if you name your estate planning attorney as your fiduciary, then he or she will still need to hire a financial advisor to manage your assets and an accountant to prepare your tax returns. A family member will also need to hire an attorney to assist with all of the legal issues pertaining to the administration of your estate, trust, or guardianship.
- High standard of care - Because institutional fiduciaries are just that, institutions, they're required to be licensed, bonded and insured. This, in turn, means that they'll be held to a very high standard of care, above and beyond what the average person would be held to, when managing your estate or trust. Therefore, if an institutional fiduciary does make a costly mistake, then a judge will be more likely to rule against the institution and, in turn, the institution will have the appropriate funds to pay for its mistakes. This generally won't be the case with an individual fiduciary who has little or no experience with managing an estate or trust unless the individual's acts amount to gross negligence.
- Rigid - Institutional fiduciaries can be extremely rigid and set in their ways when it comes to investing, managing, and spending the assets of an estate, trust, or guardianship. This can lead to unhappy beneficiaries who will be forced to go to court to resolve disputes between them and the institution. One way to avoid this problem is to put very specific instructions in your Last Will and Testament or Revocable Living Trust agreement so that the institution will have strict guidelines to follow when administering your estate or trust.
- Expensive - In order to provide all of its professional services, a corporate fiduciary will generally cost more than an individual fiduciary. As mentioned above, however, an individual will most likely need to hire a slew of professionals to assist with administering your estate or trust. These fees can certainly add up and may cost just as much as, or even more than, an institution's fees.
- Committee approach - Institutions use committees to make the vast majority of their decisions. This, in turn, can lead to long delays in actions to be taken on behalf of an estate, trust, or guardianship, as well as slow responses to a beneficiary's questions or concerns. A committee approach can also mean lost opportunities in investments that require quick responses as well as prolonged probate administration. On the other hand, a committee will bring years of experience and knowledge to the table and make the decision process a collaborative effort instead of biased or one dimensional.
- Bureaucracy - Institutions are just that, institutions, and, in reality, are made up of multiple departments and offices located in different buildings and various cities. Cutting through the red tape to find someone who can help in a pinch can be daunting, and speaking to the right person at the right time is usually impossible. On top of this, their employees are frequently promoted to new positions within the institution or leave for better opportunities at other institutions. All of this can make dealing with an institutional fiduciary, particularly one that's located in another city or state, downright frustrating. Instead of a "big box" fiduciary, consider appointing a small, independent trust company - these types of institutional fiduciaries are usually very hands on with their clients and will generally work with estates or trusts with a lower net value than larger corporate fiduciaries.