Yurikamome line in Tokyo, Japan


Monique Valbuena

Head of U.S. Trusts

Even the most sophisticated individuals hold common misconceptions about trusts. Here, we hope to dispel three of the most widely held myths so that, if and when you choose to establish a trust, you are sure to make the best possible choices for you and your family.

Myth #1– My family member will make a great trustee

It may be true that a respected family member is intelligent, knowledgeable, organized, responsible, sensitive and financially secure enough to act as the trustee of a trust you create to support your beneficiaries.
But before you name the family member as the trustee (that is to say, before you make this person alone responsible for the trust that will support your children, grandchildren and legacy), consider these three questions: 

  • Do you and the family member understand the impact that acting as a trustee can have on a person’s life? 
  • Are you sure you want to lay such a burden on someone you care about?
  • Have you looked into naming a corporate trustee but giving the family member power to oversee, remove and replace the corporate trustee? 

Most people do not fully realize what a considerable undertaking acting as a sole trustee can be. Nor do they anticipate the difficult decisions that trustees routinely face and the tensions that making those decisions can generate.

Trustees are legally responsible – and they are personally liable – for handling the trust’s investments, safeguarding trust assets, recordkeeping, tax filings and interpreting the trust, as well as making necessary disclosures and distributions to beneficiaries. 

A trustee needs specialized knowledge to comply properly with these requirements. It’s not always simple to make distributions according to a trust document’s stipulations. Beneficiaries don’t always like decisions trustees are obliged to make. Well-intentioned mistakes are all too common.

One example: A trust required payment of beneficiaries’ educational expenses. One beneficiary attended an expensive private college with an annual tuition of more than $60,000, while another went to a state school charging half as much. The trustee, a family friend, sought to preserve family harmony by distributing the cost differential to the state school attendee – only to find that such a distribution violated his duty as the trust’s fiduciary. Family gatherings suddenly became extremely uncomfortable for all – especially when the private college attendee sued the family friend personally to recover the distributed funds. 

How might you avoid such problems?

Many find it wise to name a corporate trustee instead – with a family member overseeing the trustee. The family member can oversee, remove and replace the corporate trustee, but isn’t burdened with the same risk and fiduciary duty, and can still ensure the corporate trustee is effectively fulfilling its duty. Another solution is for the trustee to hire a trust company as “agent for trustee," allowing the trustee to pass on certain administrative responsibilities to experienced professionals.

A corporate fiduciary can also act as a buffer between your personal trustee and beneficiaries. For example, a corporate trust officer might be charged with having difficult conversations, such as delivering news that a beneficiary’s requested distribution is outside the scope of a trust’s provisions.

Of course, many trust creators mistakenly believe choosing a family member to be the trustee is more cost-effective, as they’ll often be willing to perform the duties at no cost. However, once the family member hires all the accountants, attorneys, financial advisors and administrators to carry out the necessary duties, the aggregate cost is often higher (and less controllable) than it would have been to simply hire a corporate trustee. 

Myth #2: It’s tough to get distributions from a corporate trustee

Trust creators may wonder: “Will a corporate trustee take the time to know the beneficiaries of my trust and understand their needs?" And: “Will a firm’s bureaucracy make it cumbersome for my beneficiaries to access the trust funds to which they’re entitled?”

First, nondiscretionary distributions are automatic. If the trust says a beneficiary is to receive mandatory net income, those distributions are required and must be distributed to the beneficiary as specified in the trust.

To understand how discretionary distributions might be handled, you’ll want to look carefully at the firm you might name as corporate trustee or agent for trustee.

You might ask the firm to detail:

  • How much communication is common between beneficiaries and trust officers?
  • Does the firm welcome “letters of wishes”?
  • How many people are involved in distribution decisions, and how much time does it actually take, routinely, for the firm to fulfill a request for discretionary distribution that is in line with a trust agreement? 

Getting complete answers to such questions – with examples and commitments –will give you the peace of mind that your beneficiaries will be supported the way your trust agreement says they should be.

Myth 3: A corporate trustee can’t manage a trust that has illiquid assets

Trust creators used to worry that if they put their businesses, art collections, real estate and such into a trust that a corporate trustee’s legal obligation to avoid concentrations would force them to sell those assets.

But trust law has evolved dramatically in the last 20 years. Now, as a creator of a trust, you have options both within directed and discretionary trust scenarios. 

Directed trusts

The laws of some states, such as Delaware, have become so flexible that you can break up the trust functions among multiple parties. That means responsibility for specific trustee functions such as investment management or, say, distributions, can be given to another person or committee (often a family member or close connection).

Many families opt for a directed trust, as it gives them a great deal of control over heirloom assets. For example, if the asset is an art collection, the investment manager would make all decisions about holding, selling, insuring, maintaining and loaning the art. The corporate trustee then would carry out the directions of the investment advisor with respect to those decisions.

At the same time, a directed trust provides the family with the benefit of a corporate trustee’s experience and administrative expertise (handling, for example, the tax work, bookkeeping and communications to beneficiaries). Having a corporate trustee also helps with continuity, as a corporate trustee does not age out of the position as individuals do.

Discretionary trusts

Trustees have a duty to invest a portfolio prudently, which includes a duty to diversify investment portfolios. At J.P. Morgan, we generally ask that no single asset (such as real property) is more than 10% of the total assets in a trust.

A trust document might be worded so that it relieves the trustee of the duty to diversify specific assets. Your J.P. Morgan team would be happy to work with your attorney on appropriate enabling language. 

In addition, you might want to look into the benefits of having our experienced specialists manage the real estate, oil and gas interests, or closely held entities that are held in trust.

Stay up-to-date. We can help.

After you’ve established and funded your trust with a structure and trustees that work for you, it is extremely important that you check regularly to make sure everything continues to operate as you intended, and that life events haven’t made some of your trust’s terms obsolete. 

Your J.P. Morgan advisor can help you and your estate planning lawyers review your options and holdings, and their projected growth, to help you make sure your estate plan and trusts are supporting the goals you have for yourself – and for all of your loved ones.

Connect with a Wealth Advisor

Our Wealth Advisors begin by getting to know you personally. To get started, tell us about your needs and we’ll reach out to you.

Connect now


This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.