0:19 hello and welcome to trusts and Estates weekly I'm your host Kevin beml and we are here at 10 o'clock every Mo uh every Monday morning 10 o'clock pafic time that is and we talk about all things related to estate planning probate trusts um whether they're uh living trusts special needs trusts all those kind of things both from your own um planning uh perspective and from that of professionals who in help clients engage in this process um and and see it
0:56 through to its conclusion so today uh I wanted to spend uh just a few minutes um talking about an issue um I I recently had a meeting uh W with a fellow uh named Josh Jager who um basically works on administrating trusts um up in my um sort of Hometown uh Santa Barbara California um that that's where I I was raised although I wasn't born there and and we were talking about what how
1:34 lengthy um a process and how costly a process it is oftentimes to um administrate an estate or or you know to to administrate a trust um and I I think one of the key issues behind that is that um every every state basically has its own set of rules with regard to uh handling probate and estate matters so um you know for those of you
2:11 who are are not familiar with with with with what's called federalism so in the United States we have the federal government the government in Washington and the laws that it passes um apply to all 50 states in the country as well well as territories such as uh Puerto Rico and Guam US Virgin Islands Etc and the federal government is constrained by the Constitution in what areas it governs so
2:48 for example when it comes to National Defense that is a federal government responsibility that's why we have um one Army one one Marine Corps One navy one Air Force okay those are our the branches of the military and and they are run at the federal level um we do have what are called National Guards which are essentially the modern-day equivalent of State militias um and they are under the control of the governor of each state
3:24 however during times of National Emergency they can be federalized which means the the president can call them into um essentially what amounts to active duty as part of whatever whichever component um whether they're Army National Guard or Air National Guard they would go to the Army or the Air Force respectively there is no Marine Corps or navy National Guard um and so those are laws of the federal level um with the exception
4:00 of tax laws that apply um at the national level to probates and Estates um nothing else really at the federal level affects how trusts and Estates operate those happen at the state level so the the US Constitution basically says that the federal government um can only involve itself in those um powers specifically articulated in the US Constitution every other power is left
4:37 to the states or to the people um and since the Federal Constitution does not allow the federal government to control trusts and Estates that's left you know again to the states or the people in this case each of the 50 states has its its own laws now um um that that that can be good but it can also um cause some difficulties so it's good in the sense that each state can craft laws relevant to its particular population
5:15 its size the you know the complexity of the issues within those States um where it becomes more problematic is um a a situation where somebody own owns uh property in more than one state and now you have multiple jurisdictions that apply um and so all of that complicates um the process of settling an estate um handling all the various issues add on top of that that
5:54 um um each financial institution has its own way of dealing with trust and estate matters so um TD amerit trade which um actually merged with um I think Charles Schwab if I'm not mistaken so they have their way of dealing with uh trust and estate issues and those are different than you know some other brokerage like Merl Lynch or um UBS or what ever
6:30 so if an estate holds accounts from multiple financial institutions each one of those has its own way of handling that matter so you don't just fill out sort of you know one form that all of them use what you do is you have to go through the process for each one of those financial institutions and so again that further complicates things even for an estate that has property only in one state okay
7:06 it it's not at all unusual for an estate to hold Accounts at more than one financial institution okay especially if it's of any size and the um the the owner of the property prior to death wanted to make sure that um their uh funds were covered by FDIC insurance so often times in order to do that they will break up their deposits so that the amount they have in any One bank or financial
7:43 institution is within the insurance limits I I believe it's $250,000 per institution so if you've got $400,000 um in one institution let's say it's at Bank of America only 200 $50,000 of that is insured by the FDIC um the rest of it if the if if Bank of America were to fail God forbid right um then um that money would be either lost or it would be it would be put in line behind all the other uh creditors
8:19 for Bank of America on the other hand if you if you had $400,000 and you put $200,000 of it at Bank of America and the other $200,000 into US Bank okay so those are two separate institutions you're covered up to $250,000 a piece and so now the entire $400,000 is covered and that's great um you know you you want that however when it comes time to settle your estate there's going to be two separate processes the Bank of America process
8:55 and the US bank process okay now that that's probably a small price to pay in order to make sure that your funds are fully covered especially um you know earlier this year we had several bank failures what s Silicon Valley Bank um First Republic and there was one other if memory serves right so um now in those cases the depositors didn't lose any money the federal government stepped in to make sure that didn't happen um but that might won't always be the case okay and so um these are the kinds of decisions we
9:32 need to make when we're putting together our estate plan and there the kinds of issues that the the uh person or people charged with settling our estate are going to deal with after we are gone um and so again these all make dealing with Estates um more difficult um more time consuming and more costly so um I'm going to go ahead and share my screen yes here it is okay so um quite a
10:09 number of years ago um the uniform law commission um put together a uniform trust code okay now this is not the only uniform law um that exists there's something called the uniform for example there's something called The Uniform Commercial Code okay the UCC now prior to the UCC When A lender wanted to lend money on personal property that is property that can be
10:44 moved such as um uh machinery and equipment so let's say let's say for example you had a you had a company that built roads and you had big Earth moving tractors and those kind of things okay so before the UCC it was difficult to number one determine who was in fact um the true owner of that equipment but more importantly whether that equipment had previously been used as security for a debt so with the creation of the
11:19 Uniform Commercial Code and um a a document known as form uc1 was created and eventually uh all 5050 States adopt the Uniform Commercial Code and the use of this form UCC one and so now uh lenders can look for a filing by a particular company or individual for that matter to see what of their personal property has been used for security for alone okay so
11:56 if those big Earth moving tractors have have previously been used or are Cur I shouldn't say previously been used are currently being used as collateral for Al loan the A lender thinking about lending money on them can do a UCC one search uh for that company and find out whether this there's a UCC one form on file showing that these big Earth moving tractors are indeed being used as collateral so it gives greater protection ction to a prospective lender
12:32 um not only that but because it's it's a universal practice now so it's the same in all 50 states okay and there there may be some minor differences but for all for all intents and purposes the way a personal property like that is used for collateral is now Universal each state though has decided to do that on its own it was not the federal government who told the States you must adopt the Uniform Commercial Code it was each state deciding to do so and so um
13:10 in the same way the uniform trust code is now going through that process and if you see this U map here you you see that although um it's where where any state that's in blue is state that has already uh adopted the uniform trust code and you can see that it's quite a number of states however there are certain large notable states that have not including
13:45 my home state California New York where there's a lot of wealth and Texas which is become um a much more populous and Wealthy State um o over the years okay so um you will notice that Florida which is the kind of the other big Gainer um as a result of covid has adopted the uniform trust code okay Alaska has not but but Hawaii has okay so there's what roughly let's see 1 2 3 4 five 6 7 8 9
14:20 10 11 12 133 14 15 there's it looks like there's 15 states um that have not uh adopted um uh the uniform trust code yet as well as the territories of Puerto Rico I think this is the US Virgin Islands this is meant to be the US Virgin Islands and Guam okay now if you look over here in acman history so you can see that um which states have
14:56 um uh enacted it and this is the origin this is the the um version originally drafted in the year uh 2000 so if we'll go here um Bill list I think that's what we want let's see if this yeah okay so um in in actuality and here you can see the year in which um it was adopted by the various states that have adopted it okay and how many did um so you know starting in 2002 one did a whole bunch
15:31 did in 2004 through 2006 um and then it's kind of been ones and twos for the most part since then okay um the most recent state to adopt it is Hawaii Connecticut did in 2019 um and what this does is it gives a relatively uniform set of rules for handling probates trusts and Estates you see this right here okay let's we look at the summary here okay no yeah that isn't three okay so um so so what this
16:08 does is it allows um people who act as um uh fiduciaries basically whether it's individuals like me a professional fiduciary or trust companies okay they for for basically 35 out of the 50 states it gives them a relatively uniform set of rules that they have to follow okay so let's close out of this and let me show you now here we go okay so here is the uniform trust
16:46 code okay this this is the actual uh document itself um this is a PDF for you see uniform trust code it was most recently annotated this year year 2023 okay drafted by the National Conference of Commissioners of on uniform state laws and it's approved and recommended and enacted for all states okay even though not all states have um have adopted it okay um and you can see it was originally promulgated in the year 2000 and amended uh 1 two 3 four five
17:21 six times and comments were recently updated uh in 2020 and most recently 2020 3 hence a you can see April 2023 is the most recent version and it's it's 182 pages long so it is a lengthy document okay um and you can see just a couple of things of kind of historical note okay the National Conference of Commissioners on uniform state laws is is in its 114th year okay so it's it's been around since about what
17:57 1909 9 I guess 1909 yeah that would be right okay um and it it has some practicing lawyers judges legislators Etc and in um in state governments as well as District of Columbia Puerto Rico and the US Virgin Island so I guess it doesn't include uh Guam okay um and here's Here's the the the committee the original committee okay and you can see here's now so here's the table of contents okay and it talks about all the basics there's there's General Provisions
18:33 there's judicial proceedings okay which is um in other words Court proceedings there's representation okay um and then there's uh here we go um creation validity modification and termination of a trust okay so this is the whole part dealing with here here's creditor claims um and then it goes on to revocable trusts okay we I've spoken about those in um various um um previous shows Office of the
19:11 trustee duties and powers of the trustee okay in this case it would that that applies to a trust okay the uniform prudent investor act okay and this is this sets the standards for how trustees H uh have to manage um the Assets in an estate assuming that the state has adopted right the uh the uniform uh trust code okay and here's the liability of trustees and rights of persons dealing with the trustees typically the beneficiaries although it
19:46 could be the grant tours as well okay and then finally some miscellaneous Provisions okay so um this it gives you an idea of the scope and just that alone you can see that there's there can be a lot of complexity in uh dealing with a probate or the settling of a truster estate okay and so imagine if there were um 50 sets of rules one for each state plus Washington DC Puerto Rico and and the US Virgin Islands that'd be 53 different sets of rules okay and and for
20:24 a particularly large estate that maybe has property in three four five or more jurisdictions right that becomes a very very complex uh situation to deal with with the Advent of the uniform trust code um so the rules are much more um uniform and we can hope that eventually uh financial institutions will find it beneficial to perhaps create um a uniform set of documents for
20:59 dealing with trust and estate matters such that perhaps there would be one form like a uniform um uh you know probate transfer form or a uniform probate estate and Trust transfer form that all of them will accept right and so we can fill out that form one time and it can be used at from one to you know a 100 Financial institutions you can see how much time that could potentially save let's say it
21:34 takes um you know maybe between 15 and 30 minutes to fill out one of those forms okay so if you if you have to only do it once okay let's say it takes 30 minutes to do it once right well that's a lot less time than filling out four which may take as little as an hour but may take up to two hours okay and often times the cost to settle an estate um is is on an hourly basis okay so um you know if a professional fiduciary is charging $200
22:10 an hour $300 an hour or if there's a lawyer handling it at four or $500 or more an hour you can see those costs add up very quickly so the idea of um simplifying the process um could mean a tremendous savings for uh both in time and in money in in the dealing in dealing with a probate or like I said the settling of a trust or an estate so um you know for those of us and I'll I'll go back to this uh one more time so
22:47 you know for those of us in in states that um haven't adopted the UTC um I I prese presume the reason is because um places like California and New York feel that um you know the matters are so complex they they want to um exercise you know additional oversight um and and and that's a shame um what would be better would be for um these states that hav't adopted it to
23:23 address their concerns um to the uniform law commission what reservations they have about and maybe this is going on by the way I I I I don't know I haven't heard of um the UTC being uh presented for adoption here in California um maybe it's happening behind closed doors but the better process would be to submit their objections or their concerns um to the commission and work them out so that they can then um adopt the uniform trust code okay and in that
24:00 way um each state makes sure that their particular areas of concern are addressed while at the same time serving the citizens of their state by making the uh process of dealing with probates trust and Estates as efficient and as low cost as possible okay now as you might imagine there can be powerful um uh organizations who are opposed to making things less costly okay and and not to
24:38 cast dispersions on lawyers um but I can imagine that um there are lawyers out there who um you know they make a lot of money out of handling trusts and Estates um and by the way same with with trust companies and and and um professional fiduciaries um and they they may like the fact that it's complicated and further Complicated by the fact that it's different in many you know you've got basically what 15 states that haven't adopted it plus you know the other 35 15
25:13 states and and it looks like two territories that haven't adopted it um you know so you've got uh 17 and then you've got those that have so you've got 18 different uh sets of rules to deal with um if you know at the most um well that means a lot more money in in you know settling an estate um now for people who make their money doing that I suppose you know that's that's a good thing from their perspective um from my perspective while of course I want to make a nice living um what I also want
25:48 to do as a fiduciary is keep in mind that that my obligation is to act uh for my clients's interest above my own so maintaining a system that um that keeps the cost to the to clients higher the cost again I I want to stress this in terms of both time and money higher is not a system beneficial to my clients now I I'm I'm emphasizing the cost in time because if you're the beneficiary
26:23 of an estate it's not just the fact that it's cos the estate more to settle and get the Assets in the hands of the beneficiary it's also taking longer and the fact that it's taking longer has an impact on the beneficiaries too especially if they may have needs for um for for the resources that they're inheriting or it may just be the stress of having to deal with the unknown how is this all going to work out um so those are costs as well
27:00 they're not direct Financial costs necessarily but they are emotional costs that beneficiaries bear and so um for again from my perspective and and and from from Josh's perspective too we were the ones who were talking about this um I think there's you know we're looking for ways um to um to simplify the process shorten the process make the process less costly from a financial standpoint and so you know for those of you who are uh
27:37 watching this and and and perhaps have the same concerns um uh and and by the way I met um I met Josh through uh another uh um colleague uh Tim uh borcher um who has a a trust business uh based in um I believe it's Pennsylvania but it could no based in Massachusetts I believe and and and Tim has again the same concerns we're we're sort I guess sort of the Three Musketeers here starting out to be um
28:13 you know although I I would rather be dartanion frankly um because you know he was played by Jean Kelly but in any event there there are other people um concerned about this same issue and and you may be among them I invite you to get in touch with me share your concerns on this and and your ideas for how we can deal with it how we can uh simplify the process make it uh faster less costly um because it's to the good for for everybody um in in the long run um
28:48 and the fact of the matter is here in California um we're facing a a a tremendous shortage in people who have the skills and knowledge and experience to be able to act in the position of of fiduciaries and help people settle trusts so and because it it gets more complex every year it seems like for someone who's never done it before it's especially difficult and and the cost to them then of getting proper legal advice and the time it takes is particularly
29:24 burdensome and so because of that it does behoove us to figure out how we can make the whole process more efficient in order to make sure that that uh people in in general are well served so um you know a bit of an opinion piece I I I don't think this is political frankly you know I for the most part is chew uh po politics but really you know looking at this um from the standpoint of um being a professional fidu uary what's best for my clients I think this issue
30:02 should be discussed how do we make this work better for for grantors for beneficiaries for Trustees for financial institutions how do we work together um in the best interest of um the people we serve so that's what I have for you today um you know something some some food for thought as as we um head into the end of the year there's going to be holiday parties and and get togethers and all those kind of things and um here's a topic of discussion I
30:37 think that's that's well worthwhile um something U you know that that that you know as We Sip our eggnog although I'm not an eggnog guy but sip our cocktails and you know munch on our orders maybe we can uh wrestle with these things and perhaps some ideas will come certainly if you do have ideas please do share them with me uh how to contact me will be in the show notes after this um uh episode posts and um you can contact me by email or social
31:12 media Etc would love to hear from you and uh now so coming up tomorrow at 10:00 a. this is our new time for business lessons from the military okay we'll be continuing our discussion about intelligence we're going to be talking about um shoot I lost what the topic is here I'll I'll I'll I'll look it up see because I have my list right here ah classes of intelligence see I had in my mind causes of intelligence but it's classes of intelligence so the different types of intelligence basically that are
31:48 out there we're going to talk about that tomorrow at 10 a.m. Pacific time and then on Wednesday at 12:30 p.m. M Pacific time my guest is going to be Von Marie Thomas now you may remember Von Marie from a few weeks ago here on trust and Estates weekly we talked about accounting issues specifically for trust and Estates on Wednesday's show people making money Von Marie is going to talk about her career how she got into accounting and um she works primarily
32:25 with small business is and and and why she finds that particularly satisfying I should say she works primarily with small businesses and Trust in estate matters not unlike myself which is uh one of the reasons why Von Maria and I have become friends um and so you know for those of you uh especially for those of you interested in perhaps pursuing a similar career I invite you to to join us on um on Wednesday you can go go to um my Eventbrite page you can always get
33:00 a free ticket to join me live any of my guests live anytime you want or you can of course always watch us on social media so thanks for joining me this morning uh great kickoff to the week I hope uh it's nice to be back and uh look forward to seeing you later in the week signing off Marie you are my bell all the best folks