Using a Trust Company Instead of Family as Your Successor Trustee

Generally, when a couple creates a Revocable Living Trust, they name themselves as Co-Trustees.  When one Co-Trustee cannot act, due to illness, disability, death, or otherwise, the remaining Trustee is generally to act without the other.  Many times, the next in line to act, after the husband and wife, are either the adult children, grandchildren or a trusted family friend. 

Occasionally, couples are unable to name a family member as Successor Trustee and they do not want to “burden” their friends.  They feel that it would be best to name a neutral outside party, a Trust Company, to handle their Trust when they no longer are able to. 

The upside to an outside Trustee is that they are supposed to remain neutral and not favor any beneficiary over another.  An outside Trustee is generally held to a higher standard by law and usually has more knowledge and resources regarding the requirements of operating a Trust properly.

The downside to an outside Trustee is that if they do not remain neutral and do begin to favor certain beneficiaries over others, it can be extremely expensive to prove this and have them removed.  Furthermore, the outside Trustee does not know your family or the ins and outs of the family dynamics.  The outside Trustee does not have to sit down with you at Thanksgiving or face you when they have made questionable decisions.

Using an outside Trustee is sometimes a very prudent move.  Occasionally families get stuck with rogue Trust company employees who violate the very duties they are supposed to uphold and protect.  As with hiring any professional, most outside Trustees are capable and honest.  Do take care when choosing these companies.  Changes do happen over time.