By Eric Reich
Last week, we discussed what to do in the event that you don’t fully trust your heirs to be responsible with an inheritance and how to ensure your wishes get carried out. We also discussed the challenges of deciding who would be in charge of distributing those assets and how trying to decide on the right person often leads to stopping your estate planning before it even gets started. We discussed that using a trust combined with discussing your wishes via a family meeting was a good first step in the process. Further, we discussed that a qualified estate planning attorney could help you put your wishes into legal documents to ensure that your wishes are fulfilled. One of the biggest stumbling blocks in this process is trying to determine who will be the person to manage your affairs to carry out these wishes when you are gone. This person is known as the executor/executrix of your estate and/or your trustee in the case of administering a trust.
Deciding who handles your affairs when you are gone can be the source of countless family squabbles. It might be perceived by those you didn’t choose that you loved the one you did choose more than the ones you didn’t choose. The reality is that the person you choose, you typically do so because you believe that they are the best person for the job. Sadly, you are probably the only one who sees it that way. The implications can extend far beyond administering your estate. Sometimes these disagreements can cause resentments that last forever. It is not hard to see why this decision stops most estate plans in their tracks.
Trust planning creates a new entity to document your wishes. In that same line of thinking, why not consider an unrelated third party to carry out those wishes? An independent trustee could solve many of your concerns about creating family strife by naming one kid over another to act as your trustee. An independent trustee acts as a part of your advisory team alongside your financial advisor, CPA and attorney.
Benefits of using an independent trust company include:
- Experience
Unlike most trustees who have never done this before, a trust company does little else. Their expertise can be helpful regarding audits, regulatory oversight, recordkeeping, accounting, and tax law changes.
- Continuity
Many people, instead of trying to decide which kid to name, will often pick a close friend in order to avoid a family conflict. The inherent problem in doing this, however, is that your close friends are likely to be a similar age as you and as such, may not be able to handle the management of your affairs when needed due to an advanced age and may be likely to only outlive you by a shorter time period. An independent trust company can manage your trust in perpetuity.
- Expertise
Different types of trusts require different levels of expertise. An independent trust company can manage all sorts of trusts such as Special Needs Trusts, Dynasty Trusts, Marital Trusts, Charitable Trusts, Asset Protection Trusts, Irrevocable/Revocable Trusts, Total Return Trusts, Irrevocable Life Insurance Trusts (ILIT), Credit Shelter Trusts, and the list goes on.
The benefits of using an independent trust company start to become clear when you list out all of the benefits to them. To me, the biggest benefit is still protecting the family from future conflicts. Expect to pay around 0.5% to manage a trust. To me, half of a percent is a small price to pay to not have to worry about family conflict, the eventual need to replace a trustee when they resign or pass, and for expertise that extends far beyond the capabilities of any individual person.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement.
Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
