What are the pros and cons of choosing a corporate versus individual trustee for my trust? – North Carolina

Short Answer

In North Carolina, you may name either a corporate trustee (a bank or trust company) or an individual. Both must follow the same fiduciary duties: act in good faith, be loyal and impartial, prudently invest, and keep beneficiaries informed. Corporate trustees offer professional systems, continuity, and no bond requirement, but often charge higher fees and may have minimums. Individual trustees can cost less and know your beneficiaries, but may need bonding, can face conflicts, and may lack long-term continuity.

Understanding the Problem

In North Carolina, how do I decide between a corporate trustee and an individual trustee to manage an irrevocable trust that will make distributions over decades? You’re a single person with a moderate brokerage account to fund the trust and want cost‑effective administration with early distributions after a few years.

Apply the Law

Under North Carolina’s trust laws, any trustee—corporate or individual—must administer the trust in good faith, be loyal and impartial, prudently invest under the prudent investor rule, and provide information and reports to qualified beneficiaries. Court supervision is limited; most administration happens privately unless a party invokes the Clerk of Superior Court’s jurisdiction for specific issues (for example, removal, bond, or fee review). Corporate trustees licensed to do trust business in North Carolina are not required to post bond, even if the trust says otherwise. If the trust does not specify compensation, North Carolina’s rules set default compensation and a notice process for higher fees.

Key Requirements

• Fiduciary duties apply equally: Every trustee must act in good faith, with loyalty and impartiality, and keep adequate records and reports to beneficiaries.
• Prudent investment: Trustees must invest and manage as a prudent investor would, considering the trust’s purposes, time horizon, and distribution needs.
• Bond and qualification: Bond can be required for individuals depending on the trust or court order; licensed corporate trustees do not need bond.
• Compensation and notice: If the trust is silent, default fee rules apply; seeking more than a baseline annual percentage requires notice to beneficiaries and can be reviewed by the Clerk.
• Replacement and oversight: Successor trustees may be installed per the trust or by court if needed; the Clerk of Superior Court can handle removals and related relief.

What the Statutes Say

• North Carolina Gen. Stat. § 36C‑8‑802 (Duty of loyalty) – Trustee must act solely in beneficiaries’ interests; deals with conflicts and self‑dealing.
• North Carolina Gen. Stat. § 36C‑9‑902 (Prudent investor rule) – Sets the standard for prudent investment and risk‑return analysis.
• North Carolina Gen. Stat. § 36C‑7‑702 (Bond) – Bond may be ordered for individuals; licensed corporate trustees need no bond.
• North Carolina Gen. Stat. § 36C‑7‑708 (Compensation) – If the trust is silent, compensation follows default rules and may be reviewed.

Analysis

Apply the Rule to the Facts: Your irrevocable trust will pay out over decades. A corporate trustee provides continuity for the long horizon and has investment and reporting systems aligned with the prudent investor and reporting duties. For a moderate brokerage account, an individual trustee might reduce annual fees and may be closer to your beneficiaries, but the court could require a bond, and conflicts can arise if that person is also a beneficiary. Early distributions need disciplined, impartial discretion; a corporate trustee’s processes help, while an individual trustee must be vigilant about impartiality and recordkeeping.

Process & Timing

1. Who files: For a new trust, the settlor names the trustee in the trust document; no court filing is required. To change trustees later, the settlor (if permitted by the trust), a co‑trustee, or qualified beneficiaries may act. Where: Clerk of Superior Court in the county where the trust has its principal place of administration. What: A verified petition to remove/appoint a trustee; the summons used in trust proceedings is AOC‑E‑150 Estate Summons for Trust Proceeding. When: A trustee can resign with at least 30 days’ written notice to qualified beneficiaries, the settlor (if living), and co‑trustees; court approval is available if needed.
2. If a beneficiary disputes compensation exceeding the baseline annual percentage when the trust is silent, they may file a fee‑review proceeding with the Clerk within the statutory notice window (often 20 days from notice). Local scheduling varies by county.
3. When the Clerk approves removal or appointment, the successor trustee accepts the role and receives trust property; administration continues privately unless further court action is needed.

Exceptions & Pitfalls

• Corporate availability and minimums: Many corporate trustees set asset minimums and fee schedules; confirm eligibility early.
• Conflicts for individual trustees: An individual who is also a beneficiary must avoid self‑dealing and treat beneficiaries impartially.
• Bond traps: Individuals may be ordered to post bond; licensed corporate trustees are exempt. Address bond in the trust terms to avoid surprises.
• Reporting expectations: Even if court accountings are not required, trustees must keep records and provide beneficiary reports at reasonable intervals.
• Removal standards: Courts remove trustees for serious breaches, persistent failure, or other statutory grounds; ordinary friction is not enough.

Talk to a Estate Planning Attorney

If you’re weighing a corporate versus individual trustee for a long-term North Carolina trust, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.