Factors to Consider When Appointing a Professional Trustee

When you are choosing a trustee to handle your estate, a professional may be the best option. Professional trustees are experts in managing trusts, and they have no conflicts of interest with your beneficiaries. However, not all professional trustees are alike. They can take the form of banks, trust companies, or private professional fiduciaries. They also vary in the type and quality of service they provide. If you are choosing between professional trustees, there are a few factors you should consider before making your final decision.

First, consider the size of your trust. In a recent Wall Street Journal article, Braverman Law Group’s Managing Attorney, Diedre Wachbrit Braverman, explained why the size of the trust can determine the most appropriate trustee. As she noted in the article, banks are more suitable for large trusts. However, they may not offer trustee services for small to medium-sized trusts. For mid-sized estates in the $1 million to $5 million range, a trust company or private professional fiduciary may be the best choice. Finally, private professional fiduciaries are appropriate for smaller trusts due to their more manageable cost.

Second, evaluate the professional trustee’s fee structure. As Attorney Braverman noted in the article, banks and trust companies tend to charge between 0.5% and 2% of the overall value of the trust. This fee covers services such as filing tax returns, accounting for funds withdrawn from or added to the trust, investing funds, and communicating with beneficiaries. In the alternative, banks and trust companies may charge a fixed minimum fee rather than a percentage, which usually ranges from $2,500 to $5,000. Conversely, private professional fiduciaries charge an hourly rate, usually around $150 per hour. They will also charge the trust for third-party investment management expenses. Professional fiduciaries’ fees are typically lower than those of an institutional trustee, such as a bank. Additionally, professional trustees often maintain relationships with service providers, such as realtors, that can lead to significantly lower rates for these services.

Finally, research the professional trustees you are considering to determine their reliability. Not all licensed professional trustees are reliable, and some have received disciplinary reprimands from their licensing boards. When choosing between professional trustees, be sure to review their qualifications thoroughly before making your final selection. No matter which type of professional trustee you hire, you should maintain an agreement specifying the basis for the trustee’s fees and the frequency at which the trustee receives payment. A private professional fiduciary should also purchase carry errors and omissions insurance in the event that they must compensate you for a professional error. Another key indicator of reliability is your ability to reach the professional trustee. If a professional trustee is available to reach by phone and email, they may be more reliable than a trustee without a designated line of communication.

Contact a Boulder, Colorado Trusts and Estates Attorney Today

Appointing a professional trustee is only one step in the complicated process of establishing your trust. To learn more about the trust and estate planning process, contact the Braverman Law Group for assistance. The attorneys at our Boulder, Colorado estate planning firm can help you explore various options for appointing a professional trustee to handle your estate. To schedule a free, no-obligation consultation with one of our dedicated estate planning attorneys, call us at (303) 800-1588.