The Unbundled Trustee

 

When most families look for a trustee, they think in terms of two types – the individual trustee, and the corporate trustee. The individual trustee is your relative, close friend, or advisor. The corporate trustee is your local bank or financial institution. Both types of trustees have their strengths. But some families want an alternative. For them, there’s such a thing as an “unbundled” trustee.
 

“Unbundling” refers to the three functions a trustee performs. 

The traditional trustee’s work is divided into three parts:

Administering the trust

Investing the trust’s assets, and

Distributing money from the trust. 

With an individual trustee or a corporate trustee, these three functions often stay with the same person or company. With an “unbundled” trustee, the three functions are taken apart:

The trustee administers the trust. 

The investment management is contracted out to an investment advisor and fund managers.

A special advisor, called a distribution advisor, oversees distributing the money.

 

Many traditional trusts already tilt in this direction. 

For example, a family member is the “trustee,” but he or she contracts with an investment advisory firm to invest the money in the trust. Or a bank trust department keeps the trust’s books, but the bank’s investment management division actually invests the money. 

The “unbundled” trustee model simply takes this natural division of labor one more step. For families who need flexibility due to what they own, it can be very attractive.

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