You may have noticed that the Bloomberg Aggregate Bond Index is off to one of…
Years ago, while I was still practicing law full-time, I was hired to help administer the trust of a man from my church that recently died. The trustee was one of the man’s sons. I thought it would be fairly simple. The property in the trust consisted of a house, a bank account and a brokerage account worth around $75,000.
Perhaps I should have been more clear about explaining the trustee’s role because almost as soon as the son gained control of the assets, he invested some money in the stock of a company that immediately lost all its value! When I asked why he chose that investment, his response was “that’s what dad would have done”. Fortunately, the brothers got along and the loss wasn’t enough to fight over. But, the lesson is clear. Even the most competent individuals should not be a trustee. A professional trustee is almost always a better choice because they have experience; they can remain emotionally detached from the job; there are no surprises.
Unfortunately, most people do not choose a professional trustee. The reasons vary. Many banks insist on assuming all the responsibility of a trustee including the investment management of trust assets. Many people don’t have a relationship with a bank that offers trust services. Trustee fees can be hard to swallow. As a result, friends and family members are the first choice.
Yet today there are alternatives. Trust companies exist solely to carry out the administrative and record keeping function of a trust. The trust’s current financial advisor can handle the management of assets owned by the trust. Because the trust has two professionals making sure that the intentions of the trust are carried out, the chance of a big mistake happening like the one I described above are less and less.