Choosing A Trustee For Your Planned Gift Program

Choosing A Trustee For Your Planned Gift Program

A Professional And Individual Decision
Article posted in Compliance on 18 March 1999| comments
audience: National Publication | last updated: 17 September 2012


Choosing a trustee for a planned gift continues to be an increasingly complicated matter. In this edition of Gift Planner's Digest, Elizabeth L. Mathieu, Esq., President of Neuberger Berman Trust Company discusses six elements of selecting a trustee for planned gift instruments.

by Elizabeth L. Mathieu, Esq.

The relationship between a trustee and beneficiary, between an investment manager and a customer, and between a development professional and a donor, like many others, have both professional and human features. However, historically, articles about these relationships focus on the professional aspects of the relationship between trustee and beneficiary, between investment manager and customer, and on the human aspect of the relationship between the donor and the planned gift officer.

Jay Hughes1 speaks about the trustee/beneficiary relationship as sometimes akin to an arranged marriage over which the beneficiary has had no influence in the arranging, and further has no information about how to evaluate and participate in that relationship over the term of the trust. This certainly can be true in cases in which grantors establish estate tax-motivated trusts for heirs without consulting them or involving them in the process. This might also be true if a charity chooses a trustee to administer, and an investment manager to manage all of its charitable split interest gifts without investigating how they approach their professional and human responsibilities as representatives of both individual and charitable beneficiaries.

Donor dissatisfaction with such advisors can result in a reluctance to make, or recommend to others, future gifts.2 Donor satisfaction with them, however, can result both in additional future gifts and in donors recommending planned giving to others. Therefore, good trustees and investment managers can be key to developing a successful planned gift program. This should be even more true in the future as we face increasingly complex legal and tax rules pertaining to charitable and other gifts, a growing number of donor advisors who may or may not understand the esoteric nature of charitable giving, and volatile investment markets.

Indeed, the size, number, and complexity of planned giving programs have also been growing dramatically over the past 10 years. In light of these trends, there is an increased demand for professional trustees of such programs. The purpose of this article is to assist development professionals in choosing and monitoring professional trustees. It does so by suggesting questions to explore in regard to both the professional and human approach trustees take with charities and donors.

Choosing A Trustee-A Matter Of Trust

The trust business used to be quite straightforward. The grantor would choose a trustee from among the following five possibilities. Choice would be based on his or her trust of a particular individual:

  • the grantor;
  • a member of the family of the grantor and/or beneficiaries;
  • a friend;
  • a legal or accounting professional; or
  • a trust company or bank trust department.

However, in the case of a planned gift program, a beneficiary-the charity-rather than the grantor chooses the trustee to represent both income and remainder beneficiary interests. When a grantor asks a charity to take over the responsibility of choosing the trustee, he/she is giving up the natural right to choose a trustee, but not the natural right to be fairly represented in that choice, and by the trustee chosen. Therefore, it could be argued that the standard of care exercised by the charity in choosing a trustee must be high and the approach to evaluating and monitoring a trustee should be understandable to the grantor.

Further, a number of trends over the past decade complicate the task of choosing a trustee for a grantor. With respect to available trustees, historically, several major money center banks provided comprehensive planned gift services to a limited number of charities offering programs. Today, an increasing number of banks and brokerage houses offer different types of planned gift services for different types and sizes of accounts with a decreasing number of specialized professionals available to provide such services.

Some of the traditional providers are now leaving the business. At the same time, annual fees for trustee and planned giving services are rising, and minimum account sizes, or annual fees, are being imposed by those providers who are available.

Further, institutional trustees are increasingly outsourcing various aspects of such services including tax preparation, investment manager selection, and custody and recordkeeping-particularly for pooled income funds and charitable gift annuities. Therefore, to be fully informed, the development professional should inquire about the services provided by the vendors chosen by the fiduciary as well as those provided by the trustee directly.

In choosing advisors to support the choice of trustee, today there are fewer trust, tax, and estate planning experts in law firms as younger estate planners are joining banks and trust companies with increasing frequency. At the same time, law firms are not attracting major new, young talent in this area of the law that includes charitable giving. As a result, there may be fewer professionals on whom the development officer could rely in the near future.

In light of these trends, choosing and monitoring a trustee is a more daunting task than it was in the past. However, if the development professional takes the time to systematically analyze both the technical and human aspects of service delivery by trustees, he/she will have a greater chance of developing a successful long term strategic partnership with a trustee to sustain the needs of both donors and charity over the long life of a planned gift.

This article suggests that there are six principal topics that should be explored with potential trustees: business plan; charitable expertise; client relationship approach; trust accounting; and charitable investment policy and fees.

These six topics are set forth below with a list of concepts to explore under each heading. The importance of each topic, and desired responses by trustees, will be determined by the needs of each particular charity and its donors. The human, or personal, aspects of service are indicated below by bold text.

Business Plan

  • Desired types of donor and charity clients.
  • Focus of philanthropic business (investment management of trusts or endowments, processing, planning, etc.).
  • Rationale for providing services to this sector.

Charitable Expertise

  • Senior and junior trust officers' experience with each type of planned gift the charity intends to offer (total number of accounts, number of accounts per officer, average size of relationships, and number of years of experience in administering such gifts).
  • Senior and junior trust officers' familiarity with the legal, accounting, reporting, and registration requirement of planned gifts.
  • Estate planning and/or financial planning staff's experience in integrating donors' charitable gifts with other gift, estate, and tax planning objectives.
  • Planning staff's involvement with other planned gift programs.
  • The frequency of charitable gift planning training undergone by planning and administrative staff.
  • References from among those in the legal community who are experienced in structuring charitable gifts.
  • Staff dedicated to charitable gift administration.
  • Willingness to provide seminars for donors, their families, and for charity staff on matters of technical or philosophical interest.
  • Staff's personal involvement with charitable activities.

General Approach To Client Relationships

  • Cities and states in which administrative, planning, and charitable gift services are provided.
  • Planning and administrative officers' familiarity with the laws of the states in which most of the charity's donors reside.
  • Process for locating attorneys to advisor donors in the states in which they live.
  • Number of days on average needed to review trusts and other charitable gift documents.
  • Goals of gift document review (ability to administer the gift or effectiveness in implementing tax or other planning for clients and family).
  • Typical clients in terms of average levels of wealth, source of wealth, use of advisors, and charitable inclinations.
  • Client and staff turnover rate over the last three years with reasons for turnover.
  • The average number of years of experience of senior and junior staff.
  • Number of accounts and relationships per officer and administrator.
  • Willingness to provide exit clauses in planned gift documents.
  • How often donors are contacted in a year, by whom, for what purpose, and where (e.g. donor's home or trustee's office, by phone, or in person, etc.).
  • How often charities are contacted in a year, by whom, for what purpose, and where.
  • How often beneficiaries are offered education about the role and responsibilities of trustees, and methods for holding them accountable.
  • How often charities and beneficiaries are offered education about investment policy and investment markets.
  • How the individuals in charge of the relationship with the charity and its donors are compensated (sales commissions, bonuses for client satisfaction, retention, or other).

Trust Accounting

  • Who provides the trust, pooled income fund, and charitable gift annuity accounting?
  • How taxes are calculated and filed.
  • Number of lawyers and CPAs on staff.
  • How often statements are issued to donors and beneficiaries.
  • If consolidated statements are provided to the charity and with what frequency.
  • If statements can be labeled with the name of the charity.
  • How payments are made to beneficiaries of planned gifts.

Charitable Investment Policy

  • Who is responsible for developing and overseeing investment policy?
  • Approach to developing investment policy (consultation with charity and/or donor, and questions asked to determine goals and tolerance for volatility in returns in any one year).
  • Frequency of investment policy review.
  • Preferred investment style for charitable gifts (e.g., passive index, growth, value, or other).
  • Circumstances under which mutual funds or individual securities management are used for charitable gifts and why.
  • Approach for choosing and monitoring mutual funds or investment managers (including whether the trustee makes a choice of specific institutions or specific managers within an institution).
  • Availability of performance of funds or managers currently being used.
  • Details of performance (one, five, and ten years; taxable versus non-taxable accounts; accounts of a size similar to the average size of the charitable gifts attracted by the charity; performance for accounts retained as well as accounts that have left; performance after fees).
  • Availability of mutual fund or investment managers to meet with the charity or donors.


  • How fees are calculated (e.g., based on trading commissions, a percentage of the value of the gift assets, customized to tasks undertaken, liability assumed, or otherwise).
  • If the assets of all of a charity's planned gifts will be aggregated to calculate any percentage fees.
  • If payout or termination fees are charged.
  • If transaction fees (e.g., distributions, remittances, etc.) are charged.
  • Level of capital and insurance coverage.


Choosing a trustee for a planned gift continues to be an increasingly complicated matter because of the evolution of the trust industry to many types of institutional trustees, the growing sophistication of donors, and at the same time, the shrinking number of advisory professionals on which a charity may rely. The questions that should be asked to ensure that a high standard of care is exercised in the choice and monitoring of trustees should change over time as these trends continue. Nevertheless, it is hoped that the list above should be of some assistance to development professionals charged with evaluating outside trustees, and developing a partnership with such trustees to serve the needs of donors over the life of a planned gift.

  1. "The Trustee as Mentor," Hughes, James E., Jr., Esq., The Chase Journal, Insights on Trusts and Estate Planning, Vol. II, Issue 2, Spring 1998.back

  2. "Rich Donors Cite Displeasure With Financial Advisers," Hall, Holly, The Chronicle of Philanthropy, August 7, 1997, page 12.back

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