How Does a Trust Company Work?

A trust company may provide expert investment, asset management and estate settlement services for clients who need them.

Although they aren’t for everyone, a trust company can provide a variety of investment, tax and estate planning services for their customers.  Wealth Advisor’s recent article, “Understanding How Top Trust Companies Operate,” gives us a high-level overview of the nature and function of trust companies, as well as the services they provide.

A trust company is a separate entity owned by a bank or other financial institution, or in some cases by a law firm or other professional. It can manage trusts, trust funds and estates for individuals, businesses and other entities. In most cases the assets are held in actual trusts, with the trust company named as the trustee. They typically use several types of financial professionals, including financial planners, attorneys, portfolio managers, CPAs, and other tax professionals, trust officers, real estate experts and administrative personnel to effectively manage the assets.

Trust companies perform a wide variety of services related to investment and asset management. Most companies manage the investment portfolios within the trusts of their clients, however some prefer a client’s financial advisors do so instead. There’s also a variety of investments, such as individual securities, mutual funds and real estate, that can be employed to achieve growth or income.  They also can provide safekeeping services within secure vaults for other types of tangible investments or valuables, like jewelry, and occasionally for important documents, such as an original will or trust.  They also take full fiduciary responsibility for their clients’ financial well-being. This means that the clients’ best interests are always considered in each service and transaction performed.  See here for a fuller list of areas where a professional fiduciary may be utilized.  https://galligan-law.com/practice-areas/estate-planning/

Most clients use trust companies for estate settlement services, either as the executor or a trustee.  They can perform such tasks as valuation, dispersion and re-titling of assets, payment of debts, and expenses, estate tax return preparation and the sale of closely held businesses.  Trust companies frequently work with their clients’ heirs to provide the same types of services to the estate assets’ recipients as to the donor.

Trust companies aren’t for everyone, but serve a vital role in some estate plans.  They are especially useful where there are likely to be family disputes, disabled or very young beneficiaries, or in some cases, where a client doesn’t have someone they feel comfortable putting in charge of their estate.  Most clients who want to use a professional trustee must meet certain financial requirements, usually including at least a certain net worth, but for clients with these concerns, it’s worth it.  See Kevin’s Korner for more ideas on how to pick your fiduciaries.  https://youtu.be/W2LjFQFmY_I

If you expect to avoid family disputes in your estate, have young or disabled individuals or don’t have someone suitable, you should consider the use of a trust company in your estate plan.  Please contact our office for a free consultation to discuss how a professional fiduciary can help you achieve your goals.

Reference: Wealth Advisor (December 10, 2019) “Understanding How Top Trust Companies Operate”

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The Blended Family and Issues with Finances and Estate Planning

Blended families present unique issues in finances and estate planning, but an open conversation about money, your goals and your estate plan can help.

The blended family is a family dynamic that is increasingly common, which can make addressing financial issues much more of a challenge. In a blended family, one or both spouses have at least one child from a previous marriage or relationship, and together they create what’s known as a new combined family.

CNBC’s recent article, “4 ways to help blended families navigate finances,” reports that a staggering 63% of women who remarry come into blended families, with 50% of those involving stepchildren who live with the new couple, according to the National Center for Family & Marriage Research.

The issues in a blended family can be demanding, so couples often delay having the “money talk.” This is an important piece of the family financial puzzle. We’ll look at some of the ways you can work on that puzzle, and see our website for more https://galligan-law.com/estate-planning-life-stages/estate-planning-for-blended-families/:

  1. Get expert advice from your Estate Planning Attorney. Talk to an estate planning attorney about the specifics of your blended family situation.  It is important that both spouses discuss how their separate and joint money will be used, both while they are alive and after they pass away.  This includes whether the spouses want to leave their assets for the children from their prior relationships.  It is also important to discuss the role the children will have in your estate plans so that you can avoid disputes between them.
  2. Create a plan for merging relationship and money. Understanding the role money plays in combining two families is critical to the success of a healthy blended household. A basic step may be to draft a detailed plan of how the couple is going to care for one another in their marriage and in their family, in addition to how they will care for one another’s children. Try to determine the ways in which money plays a role in coming together. The more you can communicate and the more that you can exhibit a united front, even from a financial perspective, the stronger a couple will be.  This may include considering either a prenuptial or postnuptial agreement detailing how your assets will come together in the combined family.
  3. Collect documentation and monitor your money. It’s good to understand the work involved with the preparation and paperwork after divorce and remarriage. You’ll have a divorce decree or a domestic partner agreement, as well as instructions on child support and alimony. You also need to keep track of all the different financial accounts.
  4. Discuss your financial issues regularly. Ask about the financial obligations to the ex-spouses. Make sure both spouses understand if there’s child support and/or alimony, as well as responsibility for paying for housing or their utility bills.

Although these issues may be demanding, they can be successfully navigated with frank, open discussion and the advice of trusted advisers.  If you are in a blended family, please contact our office for a consultation on how these issues may be addressed in your estate plan.

Reference: CNBC (November 23, 2019) “4 ways to help blended families navigate finances”

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Amending a Trust: What are your Options?

If your trust no longer meets your needs, there are many ways to amend the trust to serve your goals for you and your loved ones.

A son has contacted an elder law estate planning attorney now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation.

The son has numerous valid concerns about paying his parents’ bills, managing their assets and avoiding personal liability if they are sued.  The author addresses these concerns for the son, but I’d like to focus on one point: updating and amending the trust.

All estate plans change over time as an individual’s needs and wishes change.  Sometimes the trust will anticipate these changes, such as naming a successor trustee to take over when the trust creators can no longer make financial decisions.  In the son’s case, that might be enough.  However, if the trust doesn’t address the issue or if the trust makers’ needs and wishes change substantially, it is sometimes necessary to amend a trust.  Sometimes it is good to amend a trust for tax reasons, such as Mary describes here:  https://galligan-law.com/higher-estate-tax-exemption-means-you-could-save-income-taxes-by-updating-your-estate-plan/

If his parents have a revocable or living trust and have the capacity to handle their financial affairs, they can choose to amend the trust themselves.  This is by far the best and cheapest option as the parents can review the trust each year, put their son in charge of their affairs if they wish and make other appropriate changes.  They can do this very easily by either making an amendment or restating the trust.  Restating is amending the trust by rewriting the terms of the trust with the changes without actually creating a new trust.

If his parents do not have the capacity to make financial decisions, that doesn’t mean the son can’t amend the trust.  Often powers of attorney permit an agent to amend a trust if the principal (person who makes the power of attorney) is incapacitated.  Now, the powers of attorney will usually have limitations built in.  For example, they may require the agent to follow the principal’s “testamentary intent.”  This means that the beneficiaries of the estate plan should be generally the same.  So, if the son wasn’t a beneficiary of the trust, he can’t make himself one now. He also still needs to act in the best interest of the principal.  But, amending the trust to protect the assets and better care for his parents is just fine.

Let’s say the trust is an irrevocable trust, or perhaps the power of attorney doesn’t permit amending the trust, what then?   There are still options.

Some trusts include “trust protectors.”  This is a person named in the trust who can amend the trust in limited ways to make sure it still works.  A trust protector is usually a trusted individual, occasionally an attorney, who can make amendments to the trust.  Depending on the reason for the change, it is also possible to ask a Court to modify the trust.   It’s even possible sometimes to “decant” a trust.  Decanting is not really amending a trust, it is creating a whole new trust with new terms, and then transferring the assets from the old trust to the new one.  These techniques are more complex and expensive, but very helpful, especially with very out-of-date trusts that haven’t been reviewed or amended in some time.

The key point is that is important to review and keep your trust up to date.  But, even if you have a trust that is old or doesn’t work well, there are many ways to amend a trust to ensure proper administration of the assets for you and your beneficiaries.

Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”

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