When you create a trust, you must name a 'successor trustee'—the person or institution who takes over when you die or become incapacitated. This is a massive legal and financial responsibility. Should you name your oldest child, or hire a bank?
The Individual Trustee (Family or Friend)
Naming a family member is the default choice for most people. It's perceived as cheaper and keeps control 'in the family.' However, it places a massive burden on someone who is likely grieving, and it often sparks bitter family disputes if siblings disagree with the trustee's decisions.
Individual vs. Corporate Trustee
| Feature | Individual (Family) | Corporate (Bank/Trust Co.) |
|---|---|---|
| Cost | Usually free (or small hourly rate) | 1% to 2% of assets annually |
| Expertise | Often zero financial/legal experience | Professional portfolio managers and CPAs |
| Impartiality | High risk of family conflict/bias | 100% objective, follows the document strictly |
| Longevity | May die, become ill, or refuse the job | Perpetual existence (never dies) |
The Corporate Trustee
A corporate trustee (like a trust company or the wealth management division of a bank) charges an annual fee, but they bring professional investment management, tax preparation, and strict legal compliance. Most importantly, they act as an impartial referee, preventing your children from suing each room over money.
Tip
The Co-Trustee Compromise
Many wealthy families use a hybrid approach: they name a corporate trustee to handle the investments and tax filings, and a family member as a co-trustee to provide personal insight into discretionary distributions.