When a Bank is Appointed as a Trustee

What Does it Mean When a Bank is a Trustee?

There may be several combinations of individuals and institutions that can serve as trustees of a trust.

What Does a Bank Charge to Manage a Trust?

A bank can act as the Trustee of California’s Trust and charge a fee for its corporate trustee services. When the grantor selects who will serve as Trustee of the Trust, they usually consider what fees may be involved and attempt to minimize them to the extent possible. A common misconception is that a bank will charge more fees to manage a Trust than what an individual trustee would collect. Both individual and bank trustees are permitted to charge a reasonable fee for their services.

Suppose you believe that a trustee is charging an unreasonable fee to manage a trust. In that case, that may be an issue you need to litigate with the help of an experienced trustee attorney in California. You may be entitled to have unreasonable fees charged by the bank trustee returned as assets of the Trust if you prevail on your claim as a beneficiary or interested party of the Trust.

What are Some of the Reasons Why You Might Appoint a Bank as Trustee of a Trust?

Even if some additional fees are associated with appointing a bank as a Trustee of a trust, there are significant advantages of having a bank oversee a trust’s assets. First of all, a bank can provide a higher level and quality of professional management services when managing a Trust that an individual may be able to. The management of the Trust is overseen by full-time and experienced professionals at a bank. This is not always the case for an individual appointed to manage a trust because they may not be able to devote themselves full-time to the task.

Another reason a bank is appointed to manage a Trust is to avoid the perception of a conflict of interest. Many times, the Trustee is a beneficiary where sibling rivalry takes place. The bank will assume a neutral position on managing the Trust’s assets and payments of its liabilities.

Moreover, when a bank is appointed, there is less concern over the Trust’s assets’ misappropriation. For example, suppose the Trustee is found to have mismanaged the assets of a trust and is required to pay back the damages to the Trust’s beneficiaries. In that case, this may not be easy to collect against an individual trustee. The Trustee could become bankrupt or insolvent, which leaves the Trust no recourse for recovering its money. On the other hand, a financial institution has plenty of assets against which the Trust and its beneficiaries may recover in the event of mismanagement.

What are the Main Bank Trustee Responsibilities?

When a bank is acting as a trustee of a trust, it has the same responsibilities and obligations that an individual trustee would. This includes managing the assets held within the Trust as well as any business, real estate, and securities held by the Trust. The Trustee should keep detailed, current, and accurate records of the Trust’s assets and any other financial transactions involving the Trust. Moreover, the Trustee also needs to file all annual tax returns on behalf of the Trust. All information should be provided to all beneficiaries and any other entitled parties.

The Trustee may choose to invest the assets of the Trust for the benefit of the beneficiaries. The basic requirements for investing the Trust assets as a trustee are conservative to provide reasonable growth with minimal risk. When assets are distributed to the beneficiaries, the Trustee should do so according to the terms of the Trust.

Contact an Experienced California Trust Litigation Attorney Today

Contact the top-notch legal team at Hess-Verdon, PLC today at 1-888-318-4430 for assistance with legal issues related to corporate trustee services throughout Southern California. Our knowledgeable and dedicated California inheritance California inheritance trust lawyers are available to help you navigate any trust-related disputes.

Trustee and Co-Trustee Conflict

When there is a conflict between the trustee and co-trustees, then the beneficiaries may petition to remove one or both in court, but again, it takes court action, which costs a lot of time and a lot of money. Even then, you may not know how the court will rule in the trust affairs. Therefore it may not go as planned.

Are you a Trustor?

If you are a trustor, then you may want to consider having the Trust name the co-trustees to act independently that is, act alone without both signatures. Logistically, if the trustees can work independently, then the trust administration process can be completed on time. For example, if a trustee goes out on vacation or is incapacitated, the other trustee can continue with only one signature needed to get everything completed and distribute the estate to the beneficiaries.

Take into consideration under California probate code section 15620 should be unanimous action to c0-trustees unless otherwise provided in the trust instrument. Your estate planning attorney should insert a particular language specifying and allowing for actions by one or the other co-trustee.

What is Unanimous Action

If the specific wording is not included in the original trust instrument or an amendment, then section 15620 requires “Unanimous action.” One can consider this as a majority rules clause.

When Co-Trustee Don’t Agree

What happens if the co-trustees can’t agree? If the co-trustees cannot agree, then any of them can file a petition for instructions under California probate code 17200, which will ask a judge of the superior court to guide the co-trustees. When a co-trustee petitions for instructions, all co-trustees and beneficiaries should be notified.