A credit union considering trust services has several questions to address before establishing a relationship with a trust company. The decision can involve fiduciary responsibilities, member communication, operational processes, regulatory considerations, and how trust services will fit alongside existing financial services.
Credit union trust partnerships can take different forms, so the appropriate structure depends on the institution, the trust company's services, applicable requirements, and the needs of the members being served.
Start With the Services Members Need
The first step is identifying the types of trust and fiduciary services members may need. These could include corporate trustee services, co-trustee services, estate settlement, trust administration, or other fiduciary roles.
A credit union may also consider whether members need services involving retirement accounts, charitable trusts, special needs trusts, or other arrangements.
Defining the potential service scope can help determine what type of trust company relationship may be appropriate.
How Will Responsibilities Be Divided?
A partnership should clearly establish which organization is responsible for each function.
Depending on the structure, the trust company may serve as corporate trustee, co-trustee, or another fiduciary capacity. The credit union may continue providing its existing financial services to the member.
Questions to address can include:
Who has fiduciary responsibility?
Who communicates directly with beneficiaries?
Who administers trust distributions?
Who maintains trust records?
How are member questions handled?
Which organization is responsible for regulatory and operational requirements?
The answers should be documented in the applicable agreements and procedures.
What Should Credit Unions Review During Due Diligence?
Before entering a relationship, a credit union may review the trust company's organizational structure, fiduciary roles, services, administration procedures, reporting, technology, and communication processes.
The credit union may also evaluate how the trust company handles onboarding, documentation, account administration, beneficiary communications, and coordination with outside advisors.
Fees and other costs should also be clearly understood.
How Will the Relationship Work for Members?
Member experience is an important operational consideration. A member may interact with the credit union for banking services and separately with the trust company for fiduciary administration.
The institutions should establish how referrals are handled, what information can be shared, how responsibilities are explained, and who members should contact for different questions.
For example, Members Trust Company is owned by credit unions and provides trust, investment management, and fiduciary services to credit unions, their members, and other clients.
What About Financial Advisors?
Some members already work with a financial advisor or RIA. A trust company relationship may need to account for that existing advisory relationship.
Depending on the arrangement, the advisor may continue providing investment or financial planning services while the trust company performs its assigned fiduciary duties. The responsibilities of each party should be established clearly.
Conclusion
Credit union trust partnerships require consideration of service scope, fiduciary responsibilities, member communication, operational procedures, and applicable requirements. A credit union can begin by identifying member needs and defining how the trust company would fit within its existing service structure.
Members Trust Company is an example of a firm that works with credit unions in connection with trust and estate services. Any proposed partnership should be evaluated based on the institution's circumstances, the trust company's defined responsibilities, applicable agreements, and regulatory requirements.
FAQ
What are credit union trust partnerships?
They are arrangements in which a credit union works with a trust company to provide trust, fiduciary, or related administrative services.
What should a credit union evaluate before partnering with a trust company?
Relevant considerations include fiduciary responsibilities, service scope, administration, reporting, communication, technology, fees, and applicable requirements.
Can a trust company serve as a corporate trustee?
Depending on the trust documents and engagement, a trust company may serve as corporate trustee, co-trustee, or in another fiduciary capacity.
Can members continue working with their financial advisors?
Depending on the arrangement, a member may continue working with an existing financial advisor while a separate trust company handles its assigned fiduciary responsibilities.
This article is provided for educational purposes only and does not constitute legal, tax, accounting, or investment advice. Trust, estate, retirement, and tax considerations vary based on individual circumstances and applicable law. Trust and fiduciary services are subject to review, acceptance, applicable law, governing documents, and Members Trust Company's policies and procedures. Investment products and services are not deposits or obligations of, and are not guaranteed by Members Trust Company, any credit union or government agency. They are not federally insured and are subject to investment risk, including possible loss of principal. Readers should consult qualified professionals regarding their specific circumstances.
Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
