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Why a corporate trustee may be better than Uncle Harry

April 10, 2013

Preparing a trust to help ensure that your assets are handled the way you want goes hand in hand with selecting the right trustee to oversee it. A trust can last for years, so you'll need a trustee with the time and interest—as well as your complete confidence—to carry out the long-term obligations.

A trustee's many tasks

Trustees must not only make sure that financial affairs are handled according to the trust document, they also have to assume a fiduciary responsibility to protect and manage the trust assets. That means:

  • Distributing trust assets as directed in the trust document.
  • Performing principal and income accounting.
  • Preparing and filing tax forms.
  • Addressing specific beneficiary issues.
  • Investing the trust assets for the benefit of all interested parties.
  • Managing the assets tax-efficiently.
  • Having a thorough understanding of applicable fiduciary and tax laws.

You could take care of all this yourself or appoint a family member to do it. But the responsibility for such tasks—and the risks of mishandling them—is a lot to ask of anyone, let alone a favorite uncle or close friend. That's why many people who establish a trust turn to a corporate trustee instead.

Consider a corporate trustee

Appointing a corporate trustee makes sense if you don't have the time, desire, or investment experience to manage your trust, and you doubt that friends and family members do either. Corporate trustees have the fiduciary experience necessary to make sure your trust is administered according to its terms. They can bring the objectivity, continuity, and tax-efficiency you want for your beneficiaries. And corporate trustees won't abdicate because of illness, death, or divorce; nor will they take a vacation, move away, or be sidetracked by personal issues.

We can help

Vanguard National Trust Company (VNTC) offers expertise, leadership, and longevity for your trust that can reduce the burden for you and your family. And whereas an individual trustee may need to search around for service from consultants and other experts, our trust professionals have ready access to a staff of specialists. This helps to simplify the trust experience for you and can increase cost-effectiveness now and in the future.

It's your choice

You can choose the role you want for us. We can serve as a sole trustee or partner as a co-trustee with a family member or friend you've selected. If you want, we can help you determine the administrative and/or management service arrangement that best fits your situation. And the total cost for the trust services we provide is often less than what you'd pay, on average, just to hold mutual funds (with no asset management or trust services) at other companies.*

Uncle Harry's lack of time and financial experience could cost you a lot more than that.

How we can work with your trust

Trustee role

How it works

What to expect from us

Investment manager for trustee

You appoint your own trustee to administer the trust, but we provide the investment management.

Objective investment management based on a custom mix of low-cost, tax-efficient Vanguard mutual funds.

Sole trustee

We provide both administration and investment management.

Objective investment management and impartial oversight and administration of your trust.

Co-trustee

We work with the trustee you've appointed to address administrative duties, invest the trust assets, and give guidance when necessary to carry out the terms of your trust document.

Objective investment management and impartial oversight and administration of your trust.

Successor trustee

You name us as your successor trustee, and we'll evaluate our ability to step in as trustee whenever you or the current trustee can no longer carry out the duties. All the while, your investments can stay with Vanguard.

Access to our trust specialists until the need for us as trustee arises. Then, upon the success of the trust evaluation, we'll assume responsibility for the trustee role you've assigned to us.

Find out more about the benefits of corporate trustees.

This is the second in a series of articles to help you understand trusts. Read additional articles from our series:

* On a $500,000 portfolio, the minimum annual fee of $4,500 would be assessed. This represents 0.90% of the total portfolio, which—when added to the 0.19% average expense ratio of Vanguard Investor Shares mutual funds—would result in a total cost of 1.09%, a figure that's less than the average mutual fund expense ratio of 1.11%. Additional fees of $2,500 per registration may apply for certain trust services. This fee covers trust administration or consulting, principal and income reporting, tax preparation and filing, and beneficiary communications. (Source: Lipper Inc. Vanguard average expense ratio: 0.19%; industry average: 1.11%. As of December 31, 2012.) This hypothetical illustration is not intended to represent the actual cost associated with any particular investment.

Contact Vanguard Asset Management Services to learn of other pricing opportunities that may be available for multiple trusts.

Notes:

  • Vanguard National Trust Company is a federally chartered, limited-purpose trust company operated under the supervision of the Office of the Comptroller of the Currency.
  • Investments are subject to risk.
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