“I had an inheritance from my father, It was the moon and the sun.
And though I roam all over the world, The spending of it’s never done.”
- Ernest Hemingway, "For Whom the Bell Tolls," American author, (1899-1961)
BY JULIA ANDERSON
It's been several months since my mother died at age 98 after a rich and fulfilling life. The settlement of her estate is being negotiated by a bank trust manager in her home town. He got the job after my mother decided several years ago to put her assets into trust management.
It's worked out pretty well.
For a monthly fee -- figured at about 1- to 1.8-percent of her total assets -- the bank paid my mother's bills the last three years of her life, paid her taxes (state and federal), managed her farm property and kept track of her income and investment holdings. Along with this responsibility came a monthly statement from the bank mailed to my mother as well as to her heirs, my sister and to me, showing the prior month's activities.
Now that my mother is gone, the bank is in charge of settling her estate, which includes the farm and investments portfolio. The process first required an appraisal of the farm property and then negotiations with my sister over whether she wants all or part of the real estate as her half of the inheritance. So far, so good.
Has bank trust management been worth it? I'd say yes.
For those without direct heirs, for those with dysfunctional and special needs family members or for those who just want an outside disinterested professional third-party to manage and then settle their affairs, a bank trust makes sense. The record-keeping and tax-reporting alone have been a plus.
Bank trust managers are bound by regulation to put the interests of the trustee (my mother) first. Bank trust managers consolidated my mother's assets -- investments, annuities, loan debt owed her, real estate holdings -- under one umbrella. The bank paid my mother's expenses in her last years related to her assisted living care. Running the farm took a big burden off of everyone including the renter-farmer.
Over the several years the bank was in charge of my mom's assets, the bank gingerly reshaped my her investment portfolio so risk was more diversified with an emphasis on income and growth. Management was certainly in line with what my mother would have done at an earlier time in her life when she was physically and mentally more able.
As part of the trust responsibility the bank is now settling the estate. Another plus.
Instead of my sister and me trying to add up assets, find documents, arrange a farm appraisal, the bank is doing it. It is acting as a third-party to find an acceptable agreement for my sister. Better the bank than any attempt I could make. While this is taking time...slow progress is better than no progress.
If you are interested in finding out more about bank trusts and the management fees they charge, contact the institution directly and ask for a fee schedule. Often those can be found online. The first question to ask yourself is whether there's enough money-assets in a trust to make bank management cost-effective.
I get the idea that banks are targeting high-net-worth individuals with assets totaling at least $2 million as their prime customers for these services. But certain special circumstances such as a disabled child, may require bank management, which they should be willing to do.
Are there downsides to a bank trust? Sure. Don't expect bank trust managers to be too keen on getting in the middle of a big family fight. They like it when things go along in an orderly way. Bank trust managers are not in the business of setting the world on fire or acting as an unpaid psychologist. Their job is to manage the assets. They are not the police.
Questions to ask when choosing a bank trust department or manager:
1. What is the experience and training of the trust manager?
2. How long has he or she been doing trust work?
3. How comfortable is the person in managing difficult family issues?
4. What kind of services and reporting does the bank provide...monthly, quarterly?
5. What's the fee schedule? Does the bank charge extra for certain additional services? What are those services and fees related to tax preparation etc.?
6. How will the investment portfolio be managed? Will the trustee have input?
7. How available will the trust manager be to family members?
8. What kind of turnover has there been in the trust department office?
9. What happens to my trust if I become mentally incompetent?
10.What language can I put into the trust document that will prevent legal wrangling among my heirs at my death?
My advice: Before looking into the benefits of a managed bank trust, meet with your family estate-planning attorney for guidance. Your attorney should be well-versed in both estate-planning legal strategies and how those options may apply to your family situation and your heirs.
Like everything else about getting older, things become more complicated. Having gone through the past 10 years of my mother's life, I'm glad she took the steps she did to provide third-party management of her financial and business affairs. Each of us may have unique situations that require an updated will as well as trust directives. This stuff is easy to push off to the future but you do yourself and your heirs a favor by working on it now.
For more: Since first writing this post, I ran across this chilling story about elder financial abuse published in the Washington Post. The message from the article --- be careful in choosing the person or entity that will manage your money when you are no longer able. Again, a bank trust, which is required by regulatory law to disclose what it's doing with your money may be a better choice than an single individual who has no reporting obligations. Click here for the Post story
"Who Should You Trust to Oversee a Family Trust" - from the WSJ, click here.
"Why Everything You Think about Aging may be Wrong, WSJ, click here.
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