St. Louis has a long tradition and belief in trusts, investment-holding companies that retain and manage assets for the benefit of heirs or institutions. According to St. Louis-based wealth management advisers, local institutions manage a few billion dollars in trusts annually.
For the people creating the trust, whether they are heads of households or wealthy individuals, the challenge is selecting a trustee suited to manage the collection of stocks, bonds, real estate, options, art, jewelry and other investments. Trustees’ goals are to assure that beneficiaries may live with fewer worries in the future.
However, there are no specific certifications or qualifications for becoming a trustee.
“Communication, confidence or a strong knowledgeable relationship, and the trusts’ performance are the main requirements for being a trustee,” says Bruce Talen, general counsel for Commerce Trust Company.
Often, a family member, friend or business partner may be designated as a trustee. That person may work on the trust in their spare time, may have limited experience and may need to hire specialists to manage special situations. The combination of factors may result in poor communication and a feeling of distrust between the beneficiaries and the trustee, Talen notes. He says a corporate trustee may be a viable solution because of a need for more experience, professionalism and communication.
“Corporate trustees focus all their time on their trusts’ performance,” Talen says. “Corporate trustees can draw on the experience of more people when managing the special needs or challenges of a trust.”
They also may have more experience anticipating children’s or family members’ financial needs 10 or more years into the future, Talen adds.
The key to selecting a corporate trustee, Talen says, is being familiar and knowledgeable about banking institutions. “People return to a bank because they have prior experience with the institution, its process and products.”
Individuals who are new to corporate trustees should consider institutions that have more than 15 years of experience in Missouri, says Maurice Quiroga, executive VP and managing director of PNC Wealth Management in St. Louis.
“Corporate trustees must know federal and state laws to administer a trust in Missouri,” Quiroga explains, adding that insight is especially valuable when managing a trust in Missouri for a great-grandchild living in California, for example.
Sometimes, people believe they can manage a Missouri trust because of Internet research, Quiroga says. “Trusts are very complicated, laws vary across all 50 states, and trustees need to know all the nuances to managing the investment.”
Corporate trustees are highly regulated and can be considered a financial safe haven for generations of family members, he says. Corporate trustees must accurately record every activity within each trust and file timely reports to regulators and beneficiaries, so people have a paper trail to support their confidence in a corporate trustee.
Another benefit is that corporate trustees—guided by documents—can manage a trust for multiple generations. If the trustee is a family friend or business manager, that person may become terminally ill and unable to identify a timely replacement. The corporation will have a large team of people to oversee the trust.
Corporate trustees also can provide for the proper care for grandchildren, Quiroga notes. Corporate trustees will never blindly dispense funds to beneficiaries with an addiction, for example, or who are unable to care for themselves. “We have a fiduciary responsibility to protect people with special needs, our duty to is help people,” Quiroga says. Corporate trustees also can find medical specialists to care or improve the health of great-grandchildren.
Benefactors who desire a successful generational trust should draft documents that have specific goals and concerns and that allow trustees to have flexibility in the investment and management of the trust.
“Fifty years ago, trusts could only invest in stocks, bonds, and cash,” Quiroga notes. “Now, we have mutual funds, stock and bond options, and many other investment tools not available decades ago.”
In a perfect world, co-trustees would exist in all trusts. A family friend or relative would work with a corporate trustee on a generational trust, Quiroga says. “Someone would provide the intimate family knowledge to guide the vast resources and experience provided by a large institution.”