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://www.galliganmanning.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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Funeral Planning: Not a Festive Thought, But A Kind One

Funeral planning as part of your estate plan provides clear, final wishes, names a person to execute them and helps your family cope at a difficult time.

No one wants to do funeral planning, but leaving instructions for your funeral and burial wishes relieves loved ones of the burden of making decisions and hoping they are following your wishes. In addition, says the article “Important to provide instructions for preferred funeral, burial wishes” from The Leader, it also prevents arguments between relatives and friends who have their own opinions about what they think you may have wanted.

What often happens is that people make their funeral plan and final wishes part of their estate plan.  In some states, burial wishes are found in a will.  However, this often presents a problem as the will is usually not looked at until after the funeral. If your loved ones don’t know where your will is, then they certainly won’t know what your wishes were for the funeral.  Without clear written directions, spiritual practices or cultural traditions that are important to you, may not be followed.

An estate planning attorney can help you create a document that outlines your wishes and will have suggestions for how to discuss this with your family and where it should be located.  In Texas, much like in New York as referenced in the article, there is a form that allows you to name an agent who will be in charge of your remains.  In Texas it is called the Appointment for Disposition of Remains.  You can give your instructions to that person in the document which takes the mystery and a lot of the difficulty out of the process.

In Texas, if you don’t name a person to control the disposition of remains, there is an order of priority for decision makers, including spouses, a child, a parent and so on.  If you wouldn’t want those individuals making these decisions, an Appointment for Disposition of Remains is essential.

For funeral planning, one option is to go to the funeral home and arrange to pay for the funeral and go to the cemetery and purchase a plot. In Texas, a pre-need, pre-paid irrevocable burial plan may also be excluded from Medicaid for long-term care purposes.  See here for more on that topic.  https://www.galliganmanning.com/elder-law-questions/

Some people wish to donate their organs, which can be done on a driver’s license or in another statement. This should also be authorized on you Medical Power of Attorney so that your agent has the authority to do so.  Donating your body for medical research or education will require researching medical schools or other institutions and may require an application and other paperwork that confirms your intent to donate your body. When you pass, your family member or whoever is in charge will need to contact the organization and arrange for transport of your remains.

A comprehensive estate plan does more than distribute assets at death. It also includes what a person’s wishes are for their funeral and burial wishes. Think of it as a gift to loved ones.

Reference: The Leader (December 7, 2019) “Important to provide instructions for preferred funeral, burial wishes”

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The Biggest Estate Planning Mistakes to Avoid

Some of the biggest estate planning mistakes are easy to avoid, including having an up-to-date will, checking beneficiary designations and planning younger.

Nobody likes to plan for events like aging, incapacity, or death. However, failing to do so can cause families burdens and grief, thousands of dollars and hundreds of hours.

Fox Business’ recent article, “Here are the top estate planning mistakes to avoid,” says that planning for life’s unexpected events is critical. However, it can often be a hard process to navigate. Let’s look at the top estate planning mistakes to avoid, according to industry experts:

  1. Failing to sign a will (or one that can be located). The biggest mistake is simply not having a will. I’ve written on this often (see here for example https://www.galliganmanning.com/everyone-needs-an-estate-plan/), but unfortunately clients consistently say they didn’t think they needed a will. Estate planning is critically important to protect you, your family and your hard-earned assets—during your lifetime, in the event of your incapacity, and upon your death.  In addition to having a will, it needs to be findable. The Wall Street Journal says that the biggest estate planning error is simply losing a will. Make sure your family has access to your estate planning documents.
  2. Failing to name and update beneficiaries. An asset with a beneficiary designation supersedes any terms in a will. Review your 401(k), IRA, life insurance, and any other accounts with beneficiaries after any significant life event. If you don’t have the proper beneficiary designations, income tax on retirement accounts may have to be paid sooner. This may lead to increased income tax liability, and the designation of a beneficiary on a life insurance policy can affect whether the proceeds are subject to creditors’ claims.  In many cases where clients tried to avoid probate, one broken beneficiary designation becomes the sole reason to probate the will.

There’s another mistake that impacts people with minor children, which is naming a guardian for minor children and then naming that person as beneficiary of their life insurance, instead of leaving it to a trust for the child. A minor child can’t receive that money. It also exposes the money to the beneficiary’s creditors and spouse.

  1. Failing to consider powers of attorney for adult children. When your children reach age 18, they’re adults in the eyes of the law. If something unfortunate happens to them, you may be left without any say in their treatment. In the event that an 18-year-old becomes ill or has an accident, a hospital won’t consult with their parents if a power of attorney for health care isn’t in place. Unless a power of attorney for property is signed, a parent may not be able to take care of bills, make investment decisions and pay taxes without the child’s signature. This could create an issue when your child is in college—especially if he or she is attending school abroad. It is very important that when your child turns 18 that you have powers of attorney put into place.

If you have any of these estate planning mistakes in your plan, please contact us for a consultation to fix these mistakes for you and your family.

Reference: Fox Business (October 15, 2019) “Here are the top estate planning mistakes to avoid”

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