What is a Corporate Fiduciary, and Should You Name One in Your Estate Plan?

The Law Offices of Brenton C. McWilliams helps Alabama families decide who should be in charge of carrying out their estate plan. One option that comes up more often than you might think is a corporate fiduciary. Here’s what you should know.

What is a Corporate Fiduciary?

A corporate fiduciary is a company — not an individual — that serves in one of the fiduciary roles in your estate plan. That could mean serving as your agent under a power of attorney, as the executor of your will, or as the trustee of a trust.

The most common corporate fiduciaries are banks and other financial institutions. But you’ll also see accounting firms and law firms serve in these roles.

How Is a Corporate Fiduciary Paid?

One thing that surprises a lot of people: you don’t have to start paying them the moment you name them in your estate plan. In a typical arrangement, a corporate fiduciary won’t charge anything unless they actually have to serve in the role.

So if you put them third in line as your trustee, for example, they wouldn’t charge a thing until it’s their turn to step in. Once they’re actively serving, they’ll charge fees based on a rate schedule — which they can usually provide upfront.

Why Would You Want a Corporate Fiduciary?

Corporate fiduciaries make sense when you don’t have anyone in your family that you trust to serve in that role. Sometimes we refer to the trustee or executor as the “person in charge.” Ideally, that’s someone responsible — often a beneficiary of the estate plan who has a stake in things going well.

But some families just can’t identify the right person. Maybe there aren’t many family members to work with. Maybe there are family members, but none of them are a good fit. In those situations, a corporate fiduciary can step in.

There’s another advantage, too. A corporate fiduciary — especially a well-capitalized financial institution — has been compared to an insurance policy. If something goes wrong, there are usually deep pockets and insurance coverage to recoup losses. To use an extreme example: if a bank trustee liquidated the trust account and lost everything, you could look to the bank and its insurance to make things right. That kind of accountability matters.

Things to Consider: Oversight and Changes Over Time

When you name a corporate fiduciary, you’re often looking far into the future. And a lot can change between now and when that company actually has to serve.

Banks merge, consolidate, split up, and restructure. You might pick a local bank in town that you have a great relationship with, but by the time the corporate fiduciary needs to step in, your beneficiaries could be dealing with the trust department of a large national bank on the other side of the state — people they’ve never met.

That’s why it can be a good idea to build some oversight into your estate plan. By default, most trust documents say that a fiduciary can only be removed by a court. But if you discover they’re charging an unreasonable rate, going through court to remove them isn’t ideal.

There are other options. For example, you might allow the beneficiaries to get together and vote to remove a corporate trustee — with the condition that they replace them with another corporate trustee, not a family member. You might give that authority to the oldest beneficiary, or to a neutral third party who you trust to oversee the situation. You might also name a trust protector — a role built into the trust specifically to provide oversight. Among the things a trust protector can do is remove and replace the trustee if things aren’t going well.

The point is, you don’t have to hand over control without any guardrails. The right estate plan builds in flexibility to deal with changes you can’t predict today.

What to Ask Before You Name a Corporate Fiduciary

If you’re thinking about naming a corporate fiduciary, talk to them first. Here are a few things worth asking:

• What do they charge? They should be able to provide a rate sheet. It’ll be subject to change over time, but at least it gives you an idea of what you’re looking at right now.
• Do they have a minimum asset requirement? Many corporate trustees require a minimum level of assets before they’ll agree to serve. If there’s a chance your trust might not meet that threshold, naming them may not accomplish anything.
• Are there things they won’t do? Some corporate fiduciaries won’t serve as agent under a power of attorney. Some won’t manage a special needs trust. It’s better to find that out before you put them in your documents.
• What’s their approach? These are the people who will be dealing with your family members. Ask them about their philosophy as trustee — what they’d like to know from you, how they plan to manage the trust, and who specifically will be making decisions.

Call Our Law Firm to Talk Through Your Options

Choosing the right person — or company — for these roles is one of the most important decisions in your estate plan. Whether a corporate fiduciary makes sense depends on your family, your goals, and who you have available to serve.

The Law Offices of Brenton C. McWilliams can help you think through it. Call our law firm at (251) 215-9275 or fill out our intake form to start a conversation. We also work with families across Alabama through virtual estate planning.

This blog post is for informational purposes only and does not constitute legal advice. Every family’s situation is different. Please call our law firm to discuss your specific needs.