TRUSTEE RESPONSIBILITIES WITH SAMANTHA SHEPHERD

A regular guest and friend of Falcon Wealth Advisors, Samantha Shepherd, joined Cory for this week’s episode of Upticks. Samantha is the president and CEO of Assured Trust Company and the managing attorney at Shepherd Elder Law. We talked about some key estate planning topics and the importance of proactively planning for the future. A summary of our conversation is below.

Cory: Can you start us off by talking about trusts and defining the different roles that are important in a trust—a grantor, a trustee, and a beneficiary.

Samantha: Trust should not be a scary word. It’s not just a tool for the ultra wealthy. A trust makes things simple for your family when you’re aging and for when you eventually pass away. A trust helps your family avoid probate and the courts.

• Grantor: These are the persons who create the trust. If the trust is yours, you’re the grantor.
• Trustee: This is the person in charge of the trust. It is often the grantor while they are alive. If you create a trust, you are the grantor and the trustee, unless you one day need someone to step in and manage the trust. 75% of us need someone to step in to manage at least some of our affairs at some point in life. This is only becoming more common as we live longer.
• Beneficiary: This is the person(s) who will receive the assets in your trust when you pass away. Sometimes conflicts are created if the person overseeing your money—the trustee—is also a beneficiary.

Regarding trustees, most of us want our children to oversee our affairs as we age. But it’s a time commitment and stressful to be a trustee. They may have children of their own and work 50 hours a week. Do they have time to be a trustee? Will choosing one of your multiple children as a trustee create conflicts between them? These are all questions to consider, because being a trustee is a burden.

Cory: Yes, and that conflict you just mentioned is why some people choose to use a corporate trustee like Assured Trust Company. Would you discuss what is a corporate trustee and what it means to work with one?

Samantha: A corporate trustee is often a bank or a trust company that can oversee your investments, spending and other financial affairs. A corporate trust can manage your affairs so that burden doesn’t fall to a family member.

I recommend working with a firm dedicated to estate planning rather than a large national bank, because estate planning firms don’t feel the need to bring all your money “in house.” For my clients, I continue to work with their chosen financial advisor. On the other hand, a large bank may essentially discard that advisor and bring your money under their umbrella.

I also have extensive, detailed conversations with all my clients about their wishes and goals. For example, if they don’t want their children to receive life insurance money all at once, I can help them structure the trust so that money is distributed when the kids turn 25, 30 and 35. Another example: I can also help clients set up their trust properly if they want to ensure their child is taken care of but don’t necessarily want that guardian to oversee the money that is left behind.

The benefit of a corporate trustee is that they can be an impartial third-party who can make decisions on your behalf, allowing your family members to be family and not have to play the burdensome role of trustee. Like Falcon Wealth Advisors, corporate trustees are fiduciaries, meaning we are required to act in the best interests of our clients. And it’s quite possible to make a trust that gives some decision-making power to both a corporate trustee and your children.

Cory: That’s an important point. Whether you choose a corporate trustee or your family member as a trustee, that person has a fiduciary responsibility. In my opinion, it’s a lot to ask a family member—especially one who may not really understand what a trust is—to act as a fiduciary. That’s not to say you shouldn’t choose a family member to be your trustee, but as the grantor, you need to understand the responsibility you’re asking them to take on.

Samantha: I am currently working with some adult children whose parents passed away and unfortunately they cannot agree on who should inherit some family jewelry. Because one of the children is the trustee, this puts them in a particularly awkward and challenging position. Thankfully they’ve brought in my company to help them discuss and figure out a solution without going to court.

Cory: I’m sure these difficult situations are common. So, we’ve laid out the benefits of working with a corporate trustee. How much does it cost?

Samantha: It doesn’t cost anything to name a corporate trustee. From there, there are levels of fees based on how much you’re asking the corporate trustee to manage, but the norm is a fee equaling about 1% of your assets. If you have a lot of money, that fee could be lower.

Assured Trust Company also specializes in special needs trusts. What’s a special needs trust? It’s an important tool to ensure children with special needs are properly seen for after their parents pass away. As part of a special needs trust, you can involve both a corporate trustee and family members in the management of the special needs child’s affairs.

If you are seeking a special needs trust but the trust manager tells you it will cost you significantly more than a standard trust—like 2-3% more—you should run away. A special needs trust may cost a little more than a standard trust, but it shouldn’t cost a lot more.

Cory: What’s the cost of not hiring a corporate trustee?

Samantha: Well, not having a trust all but ensures an attorney will be needed after you pass away. The fees involved with bringing an attorney into the probate process can be just as expensive or even more costly than hiring a corporate trustee.

Cory: Any final tips for our readers?

Samantha: Imagine for a moment that you’re gone tomorrow. That means you should begin planning today if you haven’t already. Regardless of how much money you have, you are worthy of a trust. So start exploring your options today.

Cory: Thanks so much for joining me today, Samantha. This was an insightful and important conversation for Falcon Wealth Advisors clients. If you would like to connect with Samantha, or discuss how your financial plan should inform your trust, please contact me directly at Cory@falconwealthadvisors.com.

Clients choose to work with us to enhance their financial literacy and explain exactly what their financial plan means to them.

Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.