Appointing a Bank as a Trustee

by John Cromwell

    Many people may consider hiring a bank to act as a trustee instead of appointing a relative or friend to manage their financial affairs. A bank may have more experience managing property and would be more likely to manage the trust’s assets impartially and professionally. The downside of using a bank as a trustee is that it charges a fee for its service. Also, the creator of a trust may want someone with whom he has a personal connection to oversee the trust property.

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    Step 1

    Investigate the bank options available to you. Determine whether the bank you choose has a trust department that is capable of handling the demands of your trust. Also, research the reputation of the bank’s trust department.

    Step 2

    Negotiate with the bank regarding the fees it will charge to be trustee. The fee a bank charges to serve as trustee is normally a percentage of the value of the assets in the trust. A bank generally charges 0.75 percent to 3 percent of the total asset value. A bank that charges higher fees may provide additional services, such as tax preparation.

    Step 3

    Draft the Declaration of Trust. The declaration of trust document creates the operative trust and formalizes the relationship between the trustee and the trust. The declaration also defines when the trustee should distribute the trust’s assets and to whom. The declaration should also set out the fee that the bank charges for acting as trustee.

    Step 4

    Transfer the trust property to the bank. The trustee holds the legal title of all the assets in the trust, for the trust’s benefit. Property law and the process for transferring property between parties, varies by state. Check your state’s laws for the proper process for transferring assets into the trust.

    Tips & Warnings

    • When creating a trust, consider consulting with an attorney to ensure the trust complies with all relevant state laws or visit an online legal document provider such as LegalZoom.com.

    About the Author

    John Cromwell specializes in financial, legal and small business issues. Cromwell holds a bachelor's and master's degree in accounting, as well as a Juris Doctor. He is currently a co-founder of two businesses.