Corporate trustee vs individual trustee
The short answer
A corporate trustee is a trust company or bank trust department; an individual trustee is a person, often family. A corporate trustee offers continuity, neutrality and regulatory oversight, for a fee. An individual knows you and your family and may charge little or nothing, but may not be available for as long. Many people name both, in order.
You've decided on a trust. Now comes the harder part: whose name goes in the trustee line? Usually the choice comes down to a person you know or a corporate trustee, meaning a trust company.
Both can do the job well. They just bring different strengths and different risks.
This page compares them honestly, with a table to help you decide. It's part of our guide to the four roles in every estate plan.
What's the difference between a corporate and an individual trustee?
A trustee holds and manages the property in a trust and follows its terms. Either kind can do that.
An individual trustee is a person: a daughter, a brother, a close friend, sometimes a lawyer or accountant. A corporate trustee is an institution, such as a chartered trust company or the trust department of a bank. The Consumer Financial Protection Bureau notes that a trustee can be an individual or a financial institution (CFPB).
Either way, the trustee is a fiduciary: legally required to act in your interest and follow what you wrote. In Washington, any trustee must administer the trust solely in the interests of the beneficiaries (RCW 11.98.078). The duty is the same for a sister as for a company.
How do they compare?
| Item | Individual trustee | Corporate trustee |
|---|---|---|
| Knows you and your family | Often, very well | Learns from what you wrote down |
| Availability | Depends on one person's health, job and location | An institution, not dependent on one person |
| Experience | Often doing it for the first time | Does this work every day |
| Neutrality | Can be pulled into family feelings | An outside party, with no stake in who gets what |
| Oversight | Answers to the beneficiaries and the court | Also examined by a banking regulator |
| Cost | Often little or nothing, though reasonable pay is allowed | Fees, set out in a written schedule |
| Personal touch | Knows the dog's name | Depends on the company |
The case for an individual trustee
The person you choose knows you. They know which neighbor has the key and why the piano matters. No document can carry all of that.
An individual may also cost less. Many family trustees serve without a fee. Washington does allow a trustee reasonable pay, considering the time, effort, skill and responsibility involved (RCW 11.98.070).
The CFPB observes that living trusts most often have family or a friend as trustee. Other kinds of trusts more often have professional trustees, such as a lawyer or bank trust officer (CFPB).
Where individuals can struggle
The job may come when your trustee has their own health problems, a demanding job or a new grandchild. A trust can run for years. The person you name today may be a different person, in a different place, by then.
The work also asks a lot. The CFPB guide lists four basic duties: act only in the beneficiary's interest, manage carefully, keep trust property separate and keep good records (CFPB). Our page on what a successor trustee does shows how much that involves after a death.
And family is family. A brother managing money for his siblings can find every decision second-guessed. If the people closest to you live far away, our page on planning when your children live far away may help.
The case for a corporate trustee
The main strength is continuity. A trust company doesn't retire, move to Arizona or get sick. If the officer handling your trust leaves, someone else picks it up.
A corporate trustee is also supervised. In Washington, the Department of Financial Institutions' Division of Banks regulates state-chartered banks and independent trust companies (Washington DFI). The Washington Trust Institutions Act authorizes the agency to set examination standards for state trust companies (RCW 30B.10.040).
Expertise matters legally, not just practically. A Washington trustee with special skills, or named because they said they had them, has a duty to use those skills (RCW 11.100.020).
Neutrality helps, too. When siblings disagree, an outside trustee can follow the document without being anyone's brother.
Where corporate trustees can fall short
Cost is the obvious one. Most trust companies charge a yearly percentage of assets, often with a minimum. Our page on trust company fees walks through three published fee schedules so you can see real numbers.
Some companies also want a certain amount in the trust before they'll take it on.
And a company won't know you unless you tell it. The more you write down, the better it can follow your wishes. Our guide to the care plan covers what's worth recording.
You don't have to choose just one
Many plans combine the two. There are two common ways.
In order. Name a person first and a trust company as backup, or the other way around. If your first choice can't serve, the backup steps in. Our page on naming a backup in every role explains how to set the order.
Side by side, as co-trustees. A family member and a trust company serve together. In Washington, if one co-trustee stops serving, the remaining ones carry on with all the trust's powers (RCW 11.98.016). The CFPB reminds co-trustees that they must coordinate and share information, and can't let a co-trustee harm the beneficiary (CFPB).
Here is a typical case, a composite. Joan, 70, wants her niece involved but doesn't want to load her with paperwork.
She names her niece and a trust company as co-trustees. The company keeps the books and files the returns, and the niece makes sure Joan's wishes for the house and the cat are honored.
Which is right for you?
| Your situation | Often a good fit |
|---|---|
| A capable, willing person lives nearby and the trust is simple | Individual, with a backup |
| The people you'd name are your age or older | Corporate, or corporate as backup |
| The trust will continue for years after you | Corporate, or co-trustees |
| Family members may disagree | Corporate, for neutrality |
| You want a familiar face but expert help | Co-trustees |
| The trust is small and fees would eat into it | Individual, with clear written instructions |
Talk to whoever you're considering before you name them. Ask a family member whether they truly want the job. Ask a trust company for its fee schedule and whether it will serve as backup.
Weighing more than these two options? Our guide to attorney, trust company or family widens the comparison. Choosing professional help lays out every option side by side.
The page on professional fiduciaries covers individuals who do this work for a living. And whether your oldest child should be executor takes up the family side of the same question.
Kinly's approach is one example of the combined route. Members can name Trella Trust Company, a Washington State chartered trust company, as trustee, first or behind someone they choose. If it steps in and does work, that work is billed by the hour, and you see the rates before anything starts.
Common questions
What is a corporate trustee?
A corporate trustee is an institution, such as a chartered trust company or a bank's trust department, that serves as trustee. It has the same legal duties as an individual trustee. In Washington, state-chartered trust companies are regulated by the Department of Financial Institutions.
Is a corporate trustee better than a family member?
Neither is better in every case. A corporate trustee brings continuity, experience and neutrality, for a fee. A family member brings personal knowledge and often costs less, but may not be available for as long as the trust lasts.
Can I name a family member and a trust company together?
Yes. You can name them as co-trustees, or name one first and the other as backup. In Washington, if one co-trustee stops serving, the others continue with full powers.
How much does a corporate trustee charge?
It varies by company. Most charge a yearly percentage of trust assets, often with a minimum fee, and bill separately for unusual work. Ask any company for its current written fee schedule before you name it.
Sources
- Help for trustees under a revocable living trust (Consumer Financial Protection Bureau)
- Division of Banks (Washington State Department of Financial Institutions)
- RCW 30B.10.040: Examination standards for state trust companies (Washington State Legislature)
- RCW 11.98.016: Exercise of powers by co-trustees (Washington State Legislature)
- RCW 11.98.070: Powers of trustee, including reasonable compensation (Washington State Legislature)
- RCW 11.98.078: Trustee duty of loyalty (Washington State Legislature)
- RCW 11.100.020: Prudent investor rule (Washington State Legislature)
This page is general information, not legal or financial advice. Laws vary by state.