When you create a trust that may be in effect for many years, naming a corporate trustee makes sense. You won’t have to worry about the death or disability of an individual trustee because a financial institution will endure.
However, the corporate trustee you select today may fall victim to a merger in a few years. Even if that does not happen, the people who run the trust department may retire or change jobs. In a worst-case scenario, the trust beneficiaries will be locked in to an unsatisfactory trustee.
Therefore, you should always provide some kind of escape clause. You as grantor or a majority of the trust beneficiaries can be given a limited power to replace trustees. If the replacement trustee has to be independent of the grantor and the beneficiaries, tax problems will be avoided.
If the trustee knows that replacement is possible, service is likely to be better. What’s more, your beneficiaries will be in a position to renegotiate better terms over the years.
