Choosing Charitable Trustees

There are basically three choices of trustees when creating a charitable remainder trust:

Corporate — Where neither the charity nor the donor is willing or able to serve as trustee, a bank or trust company may be the ideal choice.  Size is a consideration, since smaller trusts may not meet the corporate trustee’s dollar threshold.

Charity — Some charities will act as trustee, if permitted under state law.  The charity may insist upon restrictions as to the ages of the income beneficiaries, the size of the trust or the portion passing to the charity at the end of the income interest.  Some charities won’t be trustee if the donor retains the right to change the remainder beneficiary.  Others will be trustee so long as they are named the irrevocable beneficiary of at least 50% of the remainder. Many charities provide trustee services at low or no cost, making this an attractive option for smaller trusts and for charitable remainder unitrusts, where the payout is directly affected by the annual value of trust assets.

Individual — Donors sometimes serve as trustee to save on fees and retain some “control” over the trust.  The donor should determine if he or she is able to handle the tax, financial, recordkeeping and reporting obligations.  The trustee has a duty of impartiality and is subject to state prudent investor rules.  A donor/trustee also must avoid running afoul of the private foundation rules.  In some cases, a donor’s adviser (attorney, accountant, etc.) will act as trustee.

<back

Copyright © by R&R Newkirk. All rights reserved.