Sometimes powers conferred upon a Trustee may result in negative tax consequences if that Trustee is also the beneficiary of the trust for which he is acting. When a trustee has total discretion to distribute trust assets to himself or his dependents, the assets of the trust may be included in his estate for estate tax purposes. To avoid this, the Trustor may wish to appoint an independent Trustee or have an independent Trustee act as a Co-Trustee and limit decisions regarding distributions to just the independent Co-Trustee. 

Occasionally, sensitive family situations may also dictate that a Trustor appoint one or more "special" trustees to exercise discretion with respect to certain decisions. For example, if there are sensitive family dynamics, a corporate Trustee might decline to act unless it were given assurances that a special Trustee could be appointed for the specific purpose of dealing with those family members.

Utilizing independent or special Trustees can be helpful, but may require careful planning. For example, if the individual or corporate entity you've named for those positions is not available, then you may need to think of back-ups to ensure that the mechanism you're using is effective.

Some estate planning lawyers incorporate provisions provide for an individual to act as a so-called "Trust Protector". Typically, a trust protector is someone who is designated to make decisions about appointing or removing a trustee or determining when distributions from a trust should be made or when a trust should be terminated. Outside of specifically defined decisions, the trust protector generally has no other duties or powers. 

The trust protector position usually allows a key person to make decisions without imposing fiduciary obligations and liabilities on him. Despite this rationale, there is legal authority that suggests that trust protectors are not exempt from fiduciary duties.

Corporate trustees can be a good option for those who need the peace of mind knowing that their assets will be responsibly managed by professionals. That having been said, it's still important to vet the particular corporate trustee you wish to use by meeting with them and discussing what it would be like to work with them and to ensure that they meet your expectations. Many corporate trustees require specific provisions to be included in your trust before they are willing to agree to act as Trustee, so it's important to incorporate those provisions, if necessary.

One of the perceived downsides of hiring a corporate Trustee is the typically higher fees that they charge. Often the corporate trustee will charge a fee equal to a percentage of the assets they will be managing, which may or may not include the fees for managing investments. However, corporate trustees may be staffed with attorneys or other tax and financial professionals, and therefore may not incur the expense that a private individual would have in hiring such professionals.

A corporate Trustee may also have difficulty in carrying out provisions in your trust that requires a high degree of discretion or judgment. Family members, on the other hand, may be more familiar with the dynamics between the members and therefore exercise judgment in a way that would be more consistent with your wishes. Ambiguous standards for trust distributions or distributions requiring beneficiaries to behave in a way that is not susceptible to objective analysis may present unwanted opportunities for conflict between the corporate trustee and a beneficiary.

Corporate trustees are not a new or recent creation, and many have adapted to the changing market to provide more competitive services. So, if you're faced with a situation where a corporate trustee might be a viable option, it's worth exploring.

People frequently name a close family member as successor Trustees. The assumption is that a family member is more likely to exercise discretion in a manner that is consistent with your wishes. Nevertheless, it's important to understand that at its heart, acting as Trustee requires a great deal of integrity and financial responsibility.

Another reason that clients may frequently select a family member as successor Trustee is the expectation that the family member will request little or no compensation for their role as Trustee. Though this may seem fiscally prudent during the planning stages, one must consider that a Trustee may be exposed to liability and may need to expend a great deal of time and effort to marshal and eventually distribute the assets. For a trustee to do this effectively, the trustee may require compensation, especially if administering your trust requires him to set aside his other responsibilities.

Of course, it won't always be the case that a family member has the appropriate skill set to handle the responsibility of acting as a Trustee. In those instances, one may need to turn to a professional, such as a lawyer or accountant, or a corporate fiduciary such as a bank. While they may be more costly, their services tend to be more consistent and may have systems in place to ensure the proper administration of your trust.