Over decades of practicing estate law, I have witnessed many scenarios of individuals who have acted as the sole trustee of an inter vivos or testamentary trust which was set up by a settlor for the benefit of a beneficiary. Often such beneficiaries are disabled family members, minor children or widowed spouses. Here are some reasons why I believe it’s a mistake to appoint a single individual as the sole trustee of such a trust.
The Pitfalls of Individual Trustees
- Lack of Impartiality: Individual trustees often struggle to remain unbiased, especially when dealing with family members or long-term clients.
- Time Constraints: Properly administering a trust requires significant time commitment. Individual trustees seldom have the time necessary to properly administer a trust for someone else.
- Limited Expertise: Trust administration demands a broad range of knowledge in tax law, investments, and legal matters that individuals rarely possess.
- Misunderstanding of Responsibilities: Many individual trustees fail to fully grasp the complexities of trust documents and their fiduciary duties.
- Personal Liability: Trustees can be held personally liable for their decisions, a risk many don't fully appreciate.
- Lack of Structured Decision-Making: Unlike corporate trustees, individuals often lack established processes for making and documenting decisions.
- No Regulatory Oversight: Individual trustees aren't subject to the same regulatory scrutiny and oversight as regulated corporate trustees.
- Mortality: If an individual trustee dies or becomes disabled, it disrupts trust administration and continuity.
- Inadequate Tools: Most individuals lack the necessary accounting and reporting systems for proper trust management.
- Limited Resources: Individual trustees are often not insured and can't provide adequate compensation if errors occur.
The Corporate Trustee Advantage
Professional trustees such as Heritage Trust Company Inc. offer the following:
- Continuity: Our corporate structure ensures uninterrupted trust administration.
- Expertise: Our trust officers have extensive experience across various disciplines.
- Regulatory Compliance: We adhere to strict regulatory standards and undergo regular audits from the BC Financial Services Authority.
- Structured Processes: We employ committee-based decision-making and maintain detailed records.
- Impartiality: Our corporate nature allows us to remain unbiased in our decisions.
- Resources: We have the tools and systems necessary for efficient trust management.
- Liability Protection: We carry appropriate insurance and have the resources to address potential issues.
A Proposed Balanced Approach
While we at Heritage Trust Company Inc. strongly advocate for corporate trustees, we understand the desire for personal individual involvement. Consider naming both a corporate trustee and an individual, such as a family member or long-time friend, as co-trustees. This approach combines professional management with personal insight and continuity.
By choosing a corporate trustee such as Heritage Trust Company Inc., you ensure that your trust will be managed with expertise, impartiality, and continuity, safeguarding the best interests of the beneficiary and by extension your legacy for generations to come.
Nicole Garton is president and co-founder of Heritage Trust.
Recognized by Best Lawyers in Canada for trusts and estates and family law, she previously chaired the Canadian Bar Association Wills and Trusts Subsection (Vancouver).
Contact Nicole by email or phone at (778) 742-5005 x216.
Heritage Trust is a leading non-deposit taking financial institution, regulated by the BC Financial Services Authority (BCFSA), a government agency of the Province of British Columbia. Heritage Trust offers caring and professional executor, trustee, power of attorney, committee, escrow and family office services to BC resident clients.
We welcome you to contact us.