What does it mean to have a bank as a trustee? In a broad sense, a trustee is an individual, multiple individuals, or an institution given administrative control over a property. This individual, individual, or institution is in a position of trust to manage properties, authorities, or positions of trust and responsibility.
Having a bank as a trustee means appointing the bank to manage the trust’s assets. Banks are one option to appoint when appointing trustees to manage assets.
This guide will explain everything there is to know about banks as a trustee. It will include information regarding obligations, responsibilities, and advantages over other options. With all that said, let’s begin.
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Key Takeaways
A bank as a trust is a professional service that involves professionals (trust officers) for the day-to-day administration and management of the trust.
A bank as a trustee offers two professional services – trust administration and investment management.
Banks as a trust offer several advantages over other options, including professional management, continuity, objectivity and fair treatment, and protection against trust mismanagement.
Banks as a trustee will demand a fee.
The Advantages of Appointing a Bank as a Trustee
A trustee is a tool that helps manage a trust’s assets. Therefore, there are several advantages to appointing a bank as a trustee. Here are some of them:
Professional Management
A bank appointed as trustee will have the trust department manage the trust. The people appointed for this job are professionals, and this is their full-time job. Therefore, you can expect professional management. This is a stark opposite when appointing an individual to manage the trust’s assets, as this is considered an “amateur” job, and they’re not as knowledgeable in the day-to-day management of a trust’s assets.
Continuity
When appointing a bank as a trustee, you can expect continuity. Even if the bank changes trust officers, it’s still their obligation to manage the trust during the entire term of the trust.
Objectivity and Fair Treatment
When managing a trust, objectivity is essential to eliminate any biases. There are many types of trusts, and there might be multiple beneficiaries with different interests. Appointing an individual presents a risk to some of the beneficiaries, as they might be more inclined to manage the trust with a certain bias.
Banks, on the other hand, are objective and fair. Their ultimate objective is to see the trust grow and flourish.
Protection Against Mismanagement of the Trust
A bank ultimately eliminates the risk of trust fund mismanagement. That’s because of the checks and balances that ensure trust officers don’t have any means to steal money from the trust. This is opposite to appointing an individual or a close relative as a trustee.
There have been many examples where individuals steal money from the trust.
What Are the Duties of the Bank’s Trust Department?
When appointing a bank as a trustee, you can expect two services – trust administration and investment management. Here are the duties of the bank’s trust department:
They Comply With the Governing Trust Rules
A bank appointed as a trustee is usually the sole trustee. But the bank can also operate as a co-trustee with a family member. Regardless, the bank’s primary duty is to make choices and decisions that go along the governing trust rules.
They Distribute Assets
Trusts have different terms and beneficiaries. It is the bank’s trust department’s duty to handle checks and asset distribution per the terms of the trust.
They Assume Legal Duties
In addition to distributing checks and assets, banks appointed as trustees also handle taxes on behalf of the trust. Another duty of the bank’s trust department is to ensure trust assets are covered in the case of an unexpected loss and handle securities custody.
Conclusion
Appointing a bank as a trustee means hiring a professional to manage the trust’s assets. This is one trust management option, with the others being family members and similar individuals.
But banks offer better service due to being unbias. They have a duty to the trust’s beneficiaries to maintain a clear and objective view.
Mark Titus is the founder and proprietor of a finance-focused platform. His ardor for finance led him to create the website, where he imparts his years of acquired knowledge to others. His attraction to the subject began in his college years, where he obtained a finance degree. Mark commenced his career in the financial sector, where he worked for a major financial institution, enriching his knowledge and expertise. Over the years, he has developed a profound understanding of financial markets, investment approaches, and financial planning, resulting in an extensive skill set in the industry.
