Spectrem's study shows that less than 20 percent of investors choose a corporate trustee.
When an affluent investor wants to create a trust, there are several decisions to be made. One of the most important ones is determining who will serve as trustee for the estate.
It is possible for the investor to serve as their own trustee, and a majority of investors do just that in this day and age. However, many others choose to use a corporate or institutional trustee, who has made it part of their occupational pursuit to be able to serve investors well in this role.
In Spectrem’s new report Choosing a Trustee, investors who decided to use a corporate trustee explained in great detail why they made that decision. Spectrem’s report includes the investor’s argument in quote form to provide the best understanding of the motivation behind the decision.
There are 10 million Millionaires in the United States. There are more billionaires now than ever before. A trust, which allows the owner to state specifically how funds will be used and can protect those funds from tax liabilities, has long been thought of as an adequate way to handle great wealth.
Trust ownership is definitely more likely among the wealthier investors. Spectrem’s wealth segmentation report Asset Allocation, Portfolios and Primary Providers explains that among Ultra High Net Worth investors with a net worth between $5 million and $25 million, 49 percent have assets in a trust structure. But only 7 percent of those use an institutional trustee to handle those funds.
Among Millionaires investors with a net worth between $1 million and $5 million, only 25 percent own a personal trust. Among investors with a net worth under $1 million, the percentage drops considerably.
The decision to set up a trust is followed by the decision as to who will handle the trust. Corporate trustees are preferred because of their expertise in managing accounts, understanding investment options, dealing with tax and other trust laws, and appropriate record-keeping. They also have none of the emotional ties that can sometimes complicate individual trust setups.
Also, managing a trust is time-consuming, and can be extremely complicated at times depending on family situations. Sometimes, it is just simpler to let a corporate trustee handle the account.
”I wanted to be at arm’s length to the investments,’’ said one investor quoted in Choosing a Trustee. “I wanted to distance myself from the daily exercise of trying to stay above water. On those occasions when I have gotten involved, more times than not, it has not worked out well.”
Expertise and the awareness of current laws, standards and investment opportunities make a corporate trustee the choice for investors who are looking for an expert.
“The issue for me was to find people who I felt had a level of skill that was superior to mine,’’ said another investor using a corporate trustee. “I was hoping I would be able to find people who are clever enough to be able to protect me.”
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.