A client may already have a financial advisor, attorney, and tax professional when the question of trust administration arises. The advisor may then need to determine whether trustee responsibilities belong within the existing relationship or should be handled by a separate trust company.
Understanding when trust services for financial advisors may be appropriate starts with identifying the responsibilities involved.
When Might Trust Services Become Relevant?
Trust services may become relevant when a client has an existing trust, needs a corporate trustee, requires ongoing trust administration, or has estate planning arrangements involving fiduciary responsibilities.
The need may also arise when a client's existing trustee can no longer serve, when a successor trustee is named, or when a trust document calls for a corporate trustee.
The appropriate arrangement depends on the governing documents, client circumstances, and applicable requirements.
What Should an Advisor Consider First?
Before discussing a trust company with a client, an advisor may want to clarify:
Who currently serves as trustee?
What responsibilities does the trust document assign to the trustee?
Are distributions or beneficiary matters requiring ongoing administration?
Does the client need a successor or corporate trustee?
Which responsibilities remain with the financial advisor?
Which legal and tax professionals are involved?
These questions can help distinguish fiduciary administration from investment advisory services.
How Does a Trust Company Fit Into the Relationship?
A separate trust company may serve as trustee while the financial advisor continues providing investment management or financial planning services within the scope of the advisory relationship.
The trustee may administer trust provisions, maintain records, process distributions, and communicate with beneficiaries, depending on the governing documents and applicable agreement.
Members Trust Company, for example, identifies financial advisors as one of the professional groups it serves and provides trust and estate services.
The advisor, trustee, attorney, and tax professional may each have separate responsibilities. Those roles should be established clearly for the client.
Questions to Ask Before Introducing a Trust Company
An advisor evaluating trust services for financial advisors may ask:
What fiduciary responsibilities would the trust company assume?
What trust administration services are available?
Who handles beneficiary communications?
How are distributions administered?
What reporting and recordkeeping are provided?
How will the trust company coordinate with the advisor?
What fees and administrative costs apply?
Which matters remain with the client's attorney or tax professional?
The answers can help the advisor determine whether the proposed arrangement fits the client's circumstances.
What About Investment Management?
Trust administration and investment management can involve different responsibilities. Depending on the arrangement, an advisor may continue providing investment advisory services while a trust company handles its assigned fiduciary duties.
Investment responsibilities should be addressed in the applicable agreements and trust documents. The client should understand which organization is responsible for investment decisions and which organization is responsible for trust administration.
Conclusion
Trust services for financial advisors may be relevant when a client's planning includes trustee responsibilities, ongoing trust administration, or the need for a corporate trustee. Advisors can begin by reviewing the trust documents, identifying the responsibilities involved, and determining which professionals should participate.
Firms such as Members Trust Company provide trust and estate services for relationships involving financial advisors and other professionals. Any proposed trust arrangement should be reviewed based on the client's circumstances, governing documents, and applicable requirements.
FAQ
When should a financial advisor consider trust services?
Trust services may be considered when a client needs a trustee, ongoing trust administration, estate settlement, or other fiduciary services outside the advisor's existing role.
Can a financial advisor continue working with a client after a trust company is appointed?
Depending on the arrangement, the advisor may continue providing investment or financial planning services while the trust company performs its assigned fiduciary responsibilities.
What does a corporate trustee typically do?
Depending on the trust documents, responsibilities may include trust administration, distributions, recordkeeping, and beneficiary communications.
Should an attorney or tax professional be involved?
Legal and tax questions should be addressed by qualified professionals with the appropriate expertise.
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.
