Steamboat Pilot & Today

The use of trusts to channel one's personal assets to successors, which at one time was viewed as a blueblooded enterprise, is now practiced as commonly on Main Street as on Easy Street. It is no longer unusual to consider creating a trust for your children either during your life or by will. The use of a trust is one of the preferred methods of providing for financial management of assets left to children, if a catastrophe were to occur, and your children were left without a parent. Creating a trust is also a way to manage assets in happier circumstances such as a time period when you wish to be free of the burdens of managing your assets, while you are concentrating your energies on recreational activity, or are taking a year or two to travel around the globe. In all of these situations, you will need to consider whom to name as trustee.

Choosing a trustee is usually the most difficult decision. After all, you are "entrusting" the trustee not only with your assets but with the obligation to carry out your wishes in a prudent and responsible manner, with the goal of preserving the trust assets and providing active management of the trust's portfolio.

The rise of the use of institutional trustees was fueled by the perception that the family's assets would be properly managed if an institution with a trust officer on staff would be available, on a daily basis, to personally interact with the family. Also, because of the growth in wealth of the "baby boomer" generation in the last two decades, other financial institutions including brokerage houses and insurance companies have joined the crowd of institutions offering trust services in the hope of gaining a segment of the trust fund market.

As these institutions have merged or been acquired by ever larger entities, the trust services they are offering have become increasingly impersonal.

Additionally, with the high rate of turnover of personnel at these institutions, if you are fortunate enough to have a trust officer to work with your trust, you have no assurance that the same trust officer will be working on your trust in the future.

So it would seem that the era of individual trust services may again be needed for those families who would feel more secure in naming an individual with whom they can form a personal financial management relationship than they would entrusting their assets to a faceless trustee.

If you decide to name a institution as trustee, or as a beneficiary of a trust find that you have "inherited" an institutional trustee, at the very least, you should have a direct relationship with the individual trust officer who will manage your trust assets, and assess his or her competency for the job.

Whether you decide to name an individual trustee or an institution, you must first determine the qualifications and experience of the person handling your trust. It does you little good to retain a venerable institution if the trust officer assigned to manage your trust is inexperienced in managing trust assets or has been assigned your account as the result of a merger which occurred the week before last. It is also important in the case of an institutional trustee to determine how many accounts the officer has been assigned. Most institutional trust officers do not effectively handle more than 120 to 130 accounts. Most importantly with a corporate trustee you need some assurance, which I recommend you receive in writing, that if there is another merger or a buyout, the management of your trust will not be assigned to another trust officer without your consent and if you do not consent, that you can take your trust elsewhere without incurring any fees or penalties.

The person responsible for your trust, whether an individual or an employee of an institution should have a background, which includes among other skills: a track record in managing financial affairs, full knowledge of the laws governing the administrative and discretionary functions of a fiduciary and a thorough knowledge of the guidelines for prudent fiduciary administration. These are the minimum skills. Good trust officers are also possessed with an ability to be practical and sensitive to the needs of the families they serve. You should also expect to have your trustee provide you with thorough and easy to understand periodic reports regarding the status of your trust investments and the plans your trustee has for the future investment of the trust assets.

In conclusion, trust services should be personal and just like the services proved by other professionals, the service needs to be provided on a one on one basis to be successful for the beneficiaries of the trust.