The WAY to WOW Shows
Family Office & Professional Trustee
December 2, 2024
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[0:03] who are you and where are you going what do you [Music] want hello and welcome to trust and Estates weekly I'm your host Kevin bemel and we're here every Monday at 10:00 a.m. Pacific time to talk about all matters relating to estate planning trust in estate uh probate Administration both from the standpoint

[0:38] of uh your your own matters um your own Estate Planning and administration but also from the standpoint of professionals like my guest K and I who uh both are involved uh helping people with with all of these different uh uh tasks if you will this and and the larger situation and uh so don't want to spend a lot of time on on introductions but want to get uh directly to my guest so if you saw any of the social media posts you know that Kaa started out um having

[1:14] a a a family office and he's going to talk about that and then he ex as as his clients got older he extended his practice and and is now also a professional trustee and and you're he's seeing a generational shift uh in in his practice that I that is really I I haven't come across anyone in in my neck of the pro uh trust in Probate administration business uh you know quite like kayen so that's why uh wanted to have him on the show we we've been friends now for for a while we met through an organization called the um

[1:50] independent trustees Alliance um and and so uh and and and Kaa lives in my old Hometown Santa Barbara California where gets to enjoy life all year round and I live down here in Los Angeles so so Ka thank thanks for coming on the show Welcome oh my pleasure thanks for having me Kevin great to see you as always yeah absolutely be a part of this terrific so so let's let's you know let's Jump Right In um by by telling us how did you um get involved in creating a uh a a family office first

[2:29] first of what is a family office and how did you get involved in in in starting yours up yeah definitely um well I'll start with explaining what a family office is a family office is often created by a single family of significant wealth when they decide they want to have all of the services in house um they have significant enough means that the time that's required to give the attention to their Investments to perhaps their businesses their entities really the structure of their holistic life um is best accomplished by

[3:07] creating your own office almost like a company to manage your own wealth uh rather than having Attorneys at these firms CPAs at these firms and uh other professionals out there a family office is created to hold that all in one space um typically that investment that office also manages the Investments and is um uh like a investment ER for private assets real estate investment portfolios all those things in house sometimes it's a way to consolidate um expenses and sometimes save money in that

[3:42] capacity the next step of the family office to consider is often a multif family office this is an office that's serving more than one family um again often these fall under SEC regulation because they're managing money providing investment advice and services and charge an a my model is uh as I like to describe it succinctly an impact F focused multif family office with no Investments under management so we have no AUM no assets under management that we charge for um it's different because we're outside of SEC regulation and we are working with the investment advisers that our families already have um I like to say

[4:19] no one gets fired to work with us because we're not replacing the attorneys we're not replacing the CPAs we're not replacing the investment advisers we really like it when there's existing relationships in place that we can become a part of the family's life to coordinate oversee quarterback if you will and align all of the services and goals that the families have um I'll back up to how I got started so before before you get that when you talk about assets under management and wealth advisors yes are you referring to um solely Financial assets or um because to

[4:55] my mind that's where the SEC would get involved right you'd have to have what is it series uh 616 65 is the registered advisory um or do you include with that um other non-financial asset classes like real estate like business interests that the has no cognizance over um but you know potentially could require for example a real estate license or something like that yeah so I think of the family office as having a spectrum so there's on one end of the Spectrum you have your

[5:30] investment advisers that are under SEC regulation they're providing investment advice often you know let's say they have discretion and they're making trades and that might be the individual who hires investment adviser at any large brokerage firm to manage their money and they have discretion over it then as you start to move away you move into on the other side of the spectrum is the full family office where they're managing your money they're managing all your real estate assets every single thing you have maybe overseeing family businesses running payroll for household employees all of that stuff um there are

[6:07] investment advisers that step into the family office space and often that um The Clarity of what those services are and they start to refer themselves as a family office is typically we do bill pay So a family of significant means who has assets with them under management um they might have a bookkeeping staff and they're able to do handle personal bill pay for families MH they may then end up having someone who's able to coordinate oversee and communicate with their property managers if they have real estate asset and so there's kind of this

[6:42] building towards what eventually may be a large multif family office or on the other end of the spectrum that single family office where it's all inhouse for that family um I think a lot of investment advisers will provide the bookkeeping services they'll still charge in assets management fee you know a percentage of what they're managing and then they may add kind of bookkeeping services maybe some coordination with CPAs um maybe at some point they'll have a CPA on staff who does file tax returns so we kind of move towards the family office space of how involved we are in family's lives and how much we're

[7:19] willing to be involved in but we stay away from the investment advisory Services okay if that makes makes sense it's it's one that's um a little harder for people to sometimes wrap their mind around if they're coming from an asset under management world the reason for this structure is I never wanted to have a conflict of interest of where assets were managed and where they should be invested um I'm not building a team of people that would propos to be the right solution for every client in terms of where their money is managed and I wouldn't want the

[7:56] engagement with us and the services and the fees to be based on having their money with us because often the relationships they already have are the best ones for them or finding another investment advisor or additional investment advisors for them is not one that I want to have a conflict of interest of How It's how we charge or how we're being paid I always want the family to have the best investment advisory services that they can have right and And to clarify when you're when you're using the term investment advisory Services you're talking about any any type any uh type of asset whether it's Financial real

[8:33] estate whatever so yes okay yes I am now uh we do engage more deeply at the Real Estate Management level um because that's actually where my career started in real estate investment um I do have my real estate license so we do fulfill for some clients that kind of property manager asset manager in the real estate space um we don't do the brokerage work so we're not doing the listings or the sales we're working with the advisor or the uh Brokers that they already have um but we have the expertise and knowledge

[9:08] to be involved in that some clients who have very large sophisticated tenants we do work with them but we're working with facilities managers not you know a residential location who's got a plumbing issue so we do you know that's an area of comfort and experience for me and some other members of our team so we do work with clients who have significant real estate assets um and often have accumulated their wealth in real estate and have very little involvement in an Investment Portfolio as part of their overall picture of wealth right right yeah and so you alluded in in answering that question that that's how you got

[9:44] into so so talk to us now about how you you know you your your career you know kind of where it started and how you got into the the family office part of it so as I was finishing college and I uh went to college here and Santa Barbara Westmont College small liberal arts school u i was a business economics major added a Spanish major halfway through as I did two semesters abroad in Mexico and was interested in real estate I had some family members that were residential brokers in California and had spent a couple Summers working with

[10:19] them kind of understanding the process of buying selling Escrow in real estate and so I had looked at um real estate brokerage and in the commercial space and and also investment when I was coming out of college and was hired by Two Gentlemen who had been real estate developers and investors for at the time about 40 years and significant amount of experience they had built bought repurchased properties over their career and I was initially hired to be a property manager for the in-house assets they had they had a book of investors and they syndicated deals most of the

[10:54] time uh very you know very good returns over the years a very loyal investor base it was not hard for them to raise anywhere from 3 to 10 million within a month uh to close real estate meals and so I was hired as the property manager to come in manage all the properties that they had um and over the time there um moved from say just saying from coordinating the property management work with with contractors and leasing to taking over all the accounting bookkeeper left I said hey I can fill in until we hire someone never hired anyone

[11:29] so took over all the QuickBooks files ended up getting my real estate license ended up getting my cfp as a certified financial planner while I was there because I wanted to be able to have more conversations in house before we called the attorney called the accountants called the you know trust companies and managed IRAs and different things for clients and didn't realize I was building essentially a a dual family office we'll call it for these two partners and during that time they were slowing down as they got older and the volume of deals they were doing I had really become their trusted person and they said hey we're updating our state

[12:04] plans we'd love to put you in here as a successor trustee in case anything happens to us um you know where everything is and that was that first you know oh yeah I'd be happy to do that you know still in my mindset thinking of it as I'm an employee of yours I know where everything is this is a great way to be additionally helpful for you and um as they got older they came to me and said kind of you know you've got a a skill set in an interest in areas that are greater than just the syndication work we're doing we're slowing down in that space what if long-term we became clients and you did this work for more

[12:39] families and it was I mean it was an incredible opportunity get their reputation and their experience to also kind of switch from employee to consultant and with the reputation that they had and their Network and network I had built through working for them it wasn't um it wasn't a slow start to initially have some people go well can you do this for me too and this and then that built the multif family office which built the hey you're my person could I put you in the estate plan so I had ended up accumulating quite a few Estates where I was named but not yet

[13:16] acting as trustee realizing I had now built this trustee uh future um and then preparing for that transition because as attorneys were putting me into to the state plan for the client they then would ask well would you do this for another family of similar assets so I was starting to get introduced as a successor trustee um and realizing okay this transition from working with families while they're alive to being the trustee when they're gone actually is really seamless in

[13:51] getting to know their life and providing that piece of mind to continue what I'm aware of along the way so that's how we we've morphed into Impact Family office becoming a conduit for the trustee services that I provide and other members on my team when I launched Impact Family office it was initially called impact First Financial and the idea was I I thought that by staying away from the family office name people wouldn't think I was managing money but I think just having Financial in the name impact or you know impact First Financial people assumed that I realized I need to own

[14:26] what we're doing how I describe us anyway so there's less confusion there but I just still have to identify because it's the unique part we don't manage money this isn't an a business right we're working with families now so we can take care of them when they're gone so I I've heard the term used assets under Administration as opposed to assets under management and um I I know for my practice that's how I tend to refer to them because like you I I work I work in a on a team concept where if if there's

[15:01] Financial assets I'll either work with the existing wealth advisor or bring one in if you know if one is needed I have a number and this may be different than your experience but I seem to have attracted people who were self-managing their their you know portfolio of Securities Etc even though their primary business was real estate and so the management of their you know stocks and bonds and such was usually rather you know poor right so bringing in a wealth advisor who knows you know what she's doing has really you know a

[15:36] boon for you know for the Hees of of of of these people but yeah it's interesting I I have some clients that their professional experience and expertise was Investment Management um but they've entered the stage of life where they actually need to give that up um for some it's a I don't want to devote the time and attention that I used to devote to this and therefore finding the right investment advisor so that I can step back from that role might be you know the creation of additional time to travel and be with family and that type of thing we do a few where it's actually

[16:12] the conversation that's difficult around their mental capacity and the facilities of going maybe you shouldn't be managing things anymore and having those conversations with dignity and respect is something that you know is really important and helping them realize maybe you shouldn't be doing this anymore and then there's a transition to an outside party we have a lot of clients who have built their wealth as I mentioned through real estate and then there's a conversation at you know a later stage of life when they're in their 70s 80s where they have massive capital gains if

[16:48] they were to sell and they feel stuck right right and I guess I just I'll pass away there'll be a step up in basis there'll be a large you know component of my estate that's going to be taxable and un less we start talking about trusts and gifting while you're alive and maybe charitable remainder trusts come into play in that conversation if they have a large charitable component already in their estate plan um so we get a lot of their real estate um a number of family businesses as well and um the investment portfolios you know sometimes you see

[17:24] that same stuck in place with capital gains over a long per of time MH um we like to step in and help to Think Through what's their actual goal and then what can be shifted along the way you know while they're still still here right and what they want to accomplish while they're alive um and then make sure the things are in place to help accomplish that when they're gone right yeah now how do you work with the dynamic of the succeeding Generations who you know at at at this point may not have any um you know legal

[18:02] interest you know in all this wealth but um they're they're going to be inheriting some or all of it um and it may not just be the immediate succeeding generation there you know for someone who's you know in his in his 80s there's Pro there's likely to already be children grandchildren the grandchildren are probably not little kids they they could be 20 you know in their 20s as well right so how do you handle that dynamic yeah it's a great question I've in the last year had a number of trusts set up by parents for their almost say kids you

[18:38] know they're my age or older often and um sometimes the there's there's often two things that are prompting it there's the gift while they're alive you know moving it out of their state into into an irrevocable trust um but that's sometimes prompted by the we've kind of been the piggy B we've been the you know it's like we're still giving our K our kids allowance we want to shift this to an irrevocable trust K or the trustee and shift the relational component of it as well we want NextGen to start um

[19:15] engaging in professional advisers we want them to have a relationship with you as a trustee uh with an investment adviser that you've hired to manage this trust to budget and have these budgeting conversations with them about the trust and distributions and we want to sit back and be the parent not the you know piggy bank right they want to kind of shift that conversation out from hey our our kids would like this or this and here's some money for them and allow that to shift because someday as you said there will be a transition in most

[19:50] cases of much more assets and so this just happened a number of months ago with new clients who created a trust for each of their kids M funded the trusts with real estate I then sold the real estate um hired an investment adviser invested have sat down with each of the NextGen and said hey here's the trust documents let's go through them let me help you understand what a trust is uh what the documents say around distributions what this is for also understand that there is um a

[20:26] potential that these will be funded uh in Greater quantities during your lifetime your parents lifetime uh or after they're gone you know this trust was structured and this is specific these trusts were structured in a way that the parents could make continued gifts into them along the way and taking a different approach to each beneficiary one of them has a great thriving career has significant income themselves do we want to distribute monthly or quarterly do you want me to take into consideration some tax that you'll have on these and kind of with withhold and give you a big chunk when you file your taxes versus another one

[21:02] that might be no I manag my money really well give me the distribution you know quarterly versus monthly and just give me the whole thing I'm good at saving it myself and I always pay my taxes so getting to know the personalities and then structuring the the relationship and the distributions and the engagement with them according to the personality is something that we really enjoy doing and it's a it's a good preparation while the parents are alive for them to start to engage in this professional relationship that would have to be there if something suddenly happened to the parents it's an easier transition to say hey we're going to ease into this rather

[21:38] than hey I'm so sorry you're mourning your parents are gone and there's a whole new structure that's now in place in your life right right so one of one of the things I've noticed in my practice surprisingly really is that um in many cases the Next Generation doesn't really know exactly what their parents have and and they're they're surprised um that you know this this pot of this the size of the pot of money that exists number one and number two

[22:15] you know they're involved in something completely unrelated to what their parents did and so you know they don't have um the the background um to to deal with all the you know hundreds or thousands of of details you know that that handling this wealth comes with so uh you mentioned kind of um in passing a little bit the the educational process so um H how do you make that work um because you know

[22:51] in times I think they they feel like they're drinking from a fire hose which is really a daunting uh you know for for you know for someone yeah the conversation I had actually last week with one of these new trust beneficiaries was I mean really starting from the place of allowing them to have to know that not understanding this at all is okay and there's no expectation that they understand even what a trust is hey here's this trust document it's quite long it's very detailed it's not a

[23:26] business it's not you know it's not a business entity um I don't own it you don't own it your parents don't really own it but I am in charge of it for your benefit and and helping them you know understand that this it's okay to not understand the structure and in that process of helping them know that all questions are on the table from them and that transparency is is primary to this relationship especially starting

[24:03] for them to go are you someone I can trust right you have to build trust immediately and it takes time immediately focus on building trust even though it's not immediate trust but it's immediately start focusing on that right and so um I always I always tell them look my role is trustee I boil it down to these two things don't be sneaky and don't be stupid that's what I have to as a trustee don't be sneaky don't be stupid so right everything transparent I am open and honest and transparent with you you will have access to everything that happens in this trust um at minimum

[24:38] annually but along the way making sure that you know there's nothing sneaky going on right stupid right I have to know how to do do my job do it competently do it capably for them and helping them build that you know relational component where they're going oh I trust I trust what you say great you know I trust that you know what you're doing especially with the experience you have right you have a lot of experience to pull from when you're sharing with a client I've done this I've done this and I've done this um in the same way I tell their parents if they're we're meeting and they're in you know considering me to be a successor

[25:14] truste in their estate or trustee for a irrevocable trust they're creating I say look if you don't feel like you can trust me this isn't going to be a great relationship right because questioning what each other's saying all the time is just not going to be be helpful for us and if I'm not a personality that you think's going to fit really well with NextGen that's okay like you should find someone that they're going to be really comfortable with because they trust what they're saying make sure they're confident you know make sure they're not stupid and not sneaky when you're hiring someone but you want the beneficiary to have

[25:49] from at least from the first case the perception and the ability to trust them as a trustworthy person have a good relationship with them um because otherwise they may feel like they have to micromanage the trustee as a beneficiary and that's really hard especially if they don't know the role of the trustee or know their role as a beneficiary um so sitting down with them and and just starting from a blank slate and saying hey here's this Trust might be kind of confusing that's okay if you don't understand it the purpose of it is to do XYZ for you and my job is to make

[26:26] sure that that's done well um now then as I get to know the level of uh maybe education or experience that the beneficiary has about understanding investment assets understanding legal documents and trusts and those types of things we can get into more specifics um but sometimes the stage of life that the beneficiary is in doesn't allow them to engage a lot right to be I have four young kids to sit down with someone a beneficiary who's maybe in a similar stage of life you know either they're working with a a career that's

[27:01] growing and they don't have time to you know really really engage or they're not working and they're the domestic partner or household engineer and they're running the show with all the kids and they just say hey I love this I trust you this is going to be a huge benefit in my life just send me the distribution once a quarter you know and I and I and I would then in that case say well we need to at least meet meet a few times a year I want to make sure that you're getting this and you know I can walk you through things and and and the duties that I

[27:37] have to make sure that things are clear and transparent so I really look at who the beneficiary is what interest they have in in involvement and I have some really young ones I have some really young beneficiaries who have expressed interest and they will grow into a greater understanding of the trust they might be a minor as a beneficiary initially and so I'm sharing with their parents um but then hey if you want to jump on a call and walk through how this is invested happy to share that with you um you know I have a number of beneficiaries in college you know one is

[28:12] going a very artistic kind of MFA Fine Arts route um doesn't care as much about how it's invested um but cares very much in having conversations around how this can support their career path right creative space another one that's going through finance and business at you know in college and going I really want to understand this because I want to be able to get into this as a career or do this on the side personal so I have always stressed that the relationship between the trustee and the beneficiaries needs to be thought of as

[28:49] a good combo and a good pair I'm sure your experience as well right when you feel like you connect well with the beneficiary it's so much easier trust established they understand they trust you you trust them too because that's another piece if you don't I've had some and I have a few where their requests come with always a filter for me to say is that really what you're asking for or really what you need and so building that trust for them to be able to communicate clearly back um is really important too yeah so kind

[29:24] of flipping this over a little bit now I could imagine that there are times when perhaps the relationship between um the you know the the the grantors of a trust and and their children beneficiaries are not so good and so the idea right of having you know Mom and Dad's guy you know handling my stuff is is not particularly welcome so um how do you handle those

[29:59] situations yep yep um I'll use an example that has happened a number of times over the years where it's been surprise you're trustee and the family doesn't know who I am and I've had I've had two oh I have two that are similar and different first one was surprise to the family Kai's the trustee um it was a sudden passing of a husband um but the wife said look I trusted who

[30:34] my husband's advisers were you know he always chose them well I'm going to start with you know assuming the same about you and we've built a great relationship and I'm the trustee of the marital trust and and a number of things and in that space it's hey I'm your trustee but I don't ever want you to feel like you know this you've been left in a in a cage that I manage for the rest of your life right that's the worst way to think about uh especially a surviving spouse you know who still has a long life ahead of her and so finding that appropriate amount of involvement is really important in the other ones

[31:09] where it's surprise you're trustee family always thought that they were trustees um have fun you know kind of had that call from the attorney right where it's like oh I had a call with that individual I didn't even know they put me in the trust um those are the most difficult ones because you haven't been able to I haven't been able to establish a relationship of trust already and I put as much time as I can immediately into introducing myself helping him understand that I'm at least confident and experienced in this space you know it wasn't Mom or Dad's friend from school friend from

[31:46] Church College buddy right those types of things um but it doesn't mean it goes well um and one of the things that I'm learning is upfront some of the difficult questions that come out later are things to ask upfront sometimes it's questions around is there any Addiction in the family right Are any are any of the beneficiaries going to have erratic behavior that I need to maybe have a little more context to um are there mental health issues right maybe there's a bipolar maybe there's manic depress where they're

[32:22] going to be on you know very communicative and then gone and disengaged for a long period of time um and asking some of those questions up front you know trying to say what is the landscape of expectation here around communication back and forth with them um is really helpful to set kind of those initial like filters of going okay I'm receiving this email that sounds really you know uh aggressive or they clearly don't trust anything I'm doing with this massive host of questions and having some of those maybe are there mental health issues are there

[32:57] addiction issu any of those things that would be helpful to understand relationally when you start can help give a a little more empathy or sympathy in that communication upfront and then understanding maybe their own experience professionally in understanding some of the stuff you know I've sent a a financial statement to someone and after them they were asking lots and lots of questions how's this being spent what's you know what's this what's this this and I send them all of the details literally hundreds of pages of all the details and in my mind it was look I'm being 100% transparent with you and then in the next meeting they're

[33:32] asking some of the same questions and I go well did you look at what I sent you and I realized no they didn't and it was too much it was overwhelming so they actually didn't look at any of it and and they actually thought that maybe I was hiding something by sending so much information so those conversations around what is their level of comfort and how much communication and how much detail do they want and then trying to get at the root you know maybe concerns about the estate I'm sure you've dealt you know with the um questions around personal

[34:07] property you know what did they see as valuable what is actually valuable and when they say oh yeah just sell everything get rid of it and then later go well what about this and what about this right and so um every one each one of them is different and kind of and from the start trying to establish the mode of communication the volume the sophistication not in a insulting way but sophistication they have with some of the reporting and and communication you're going to provide and then the

[34:43] other one is really for uh for me often explaining look I'm gonna provide you a lot of communication in email I know you're gonna want a phone call all the time but I'm still going to put it in email first and then we can have a followup because I do have a duty to report and explain and show that I've communicated this to you maybe to you and your attorney or to you and the estate's attorney um and if you're not responding an email and want calls instead I may need to transcribe those calls you know so there's a record of that um and that came up recently actually asking someone I said you know

[35:19] if you have an issue with maybe processing my emails right maybe dyslexia right maybe they're not willing to admit that a phone call is the easiest way to do it m um and then adapting to those those situations but as as trustees we have a duty to report right and to make sure we're communicating you know to them and keeping them up to date on things right and then that balance of how much time we spend on that versus how much we are supposed to and how much they think is sufficient is always the the tricky piece now how do you deal with a situ situation where let's say you one spouse is the

[35:54] beneficiary or one part is the beneficiary I should say and that that part that party is married but the spouse is not a beneficiary the spouse is the spouse of the beneficiary right um again that's a dynamic that I've seen um and and you know sometimes I've even seen it where the beneficiary it really doesn't have any kind of financial sophistication but but the spouse does and and and the the beneficiary has always relied on the spouse to handle those kind of things

[36:30] right so now you've got sort of this I want to call it a third party because it's not really but legally it is right so how do you how do you deal with that situation so kind of um maybe clarifying if I'm to become a trustee for let's say a Survivor spouse um I'm thinking more like a child Maybe benit is a child right and the child is the beneficiary the child's spouse is is is not a legal beneficiary

[37:05] right but that that child's spouse could indeed be the more financially sophisticated of the two or may be financially sophisticated right and yet they have no legal role Vis the trust right so how do you how do you deal with that so the beneficiary does have the right to bring any to the meeting that they want to right so if I called the beneficiary and said hey I'd love to review the investment performance and distributions and maybe the plan for next year and they say well can I my my spouse come you know they're helpful in helping me

[37:40] understand this I would say yes as long as you are requesting that you know they say hey I'd like my accountant to come uh my best friend to come right um there' probably be few cases in which I'd say no you might want to reconsider that but um I've explained to some people when I've given them the trust I said this is your document now you can take pictures and post it on your social media all you want you own this document now I wouldn't recommend that but you know you can tell anyone and everyone that you have this trust and the details of it I

[38:16] can't you know legally stop you from that um so if you have you know a particular person you want to come and I've had this where it is a child beneficiary who's brought uh their parent uh even if they're legally an adult right early 20s maybe in college I'm thinking one specifically where father passed away had kids from different marriages right wasn't married to either of the mothers at the time of his passing and so you know kids in their early 20s who are in college uh asking if their mom the ex spouse can

[38:51] come and in those experiences it's been yes it's actually really helpful um to to have that spouse kind of be the ex spouse the mother of the beneficiary to kind of be a bit of a the holder of knowledge in that face um my hope would be that over time they grow into understanding the trust and I've developed a relationship specifically with them um I'm always very careful in understanding the relationship and and the interest maybe from an unrelated party who's sitting in on those meetings

[39:26] MH but the reality is I could have the meeting without the the mother she could be sitting outside in the you know in the foyer out here and I could have the meeting with the with the child and they walk out and hand the mom everything I just gave them so there's no point in having that just for show um yes questioning a little bit of the what's the unrelated Pary interest and and are they helpful in the scenario um I have had a situation where I've told the beneficiary um I don't think your is beneficial to our meetings um right and that spouse is not

[40:01] a related party and the trust uh does not benefit them it does tangentially VI the distributions to community property right but maybe their personality or their uh questions are ones that seem more self- serving I always have to have that radar because our job is also to look out for the beneficiary's interest right and just because someone's married in a relationship doesn't mean the other person's always in their best interest and we have to be uh suspicious and

[40:36] careful of that too yeah indeed indeed yeah so one of the hardest learned lessons I know for that business lessons for me was that sometimes there is a point at which I have to fire a client yeah right um because and and it seems like this sort of works on the parto principle it you know 80% of your time goes to servicing the 20% of your clients who are just so unreasonable so difficult Etc right and

[41:12] so what you you find that you can't really focus on the people who really deserve your attention so I'm curious have you ever gotten to the point where you felt that you had to resign or withdraw as as as as trustee and and and how did you handle that because I think especially for younger people getting into this business and I I I was young when I started my first real estate company I was in my um mid 20s like and and I remember those Hungry Years right

[41:47] you I was not gonna you're gonna drag the business out of my hands you know right um but then as I got a little bit older I realized that you know that that I would would have been much smarter if earlier in my career I had you know come to terms with that that that particular issue so I'm curious what your experience is in that respect I I had a client years ago who was family office space right I wasn't yet acting in a trustee role and he had come to me saying look we have a small estate my wife stands to inherit quite a bit

[42:24] but we have some you know rental properties small real estate portfolio I really want you to you know kind of step into managing all this for us and this was one of those questions around trust right I meet with his with him and his wife and say great you want us to step into managing this project and then the wife would never give us the contractor's phone number or would have all the Billings still go to her and then forward to to us and there was a there was a time

[42:59] where there was a mutual connection with her mother who she was going to inherit a significant amount of wealth this is Santa Barbara there's everything's one degree two degrees separation right and I mentioned oh so and so know so and so that you know that I know and the immediate response was why is that relevant why is that important for you to tell me that well it's not but we have mutual connections and um I saw that start to snowball into a bit more of a distrusting relationships and I remember having

[43:35] lunch with the husband and saying look I'm sending you bills for time that's not accomplishing anything I'm spinning my wheels here you know I can't step into the role that you've asked us to do your wife is not handing things off which was one of your goals to create more time by us taking over for the two of you and and until she has the capacity to trust us to handle this I just can't I don't feel good about sending you a bill for the time that I'm trying to follow up to take on

[44:10] things and um love to work with you if we can ever work that out but I'm going to need to step out of this until you sort that out and so that was that was one of the first clients I Let Go years ago in the family office space I am right now actually talking with an attorney about an estate that we're in administration where the attorney's the special trustee able to make a couple calls at the end of the administration and one of those is around um deciding that the sub trust created allowing the beneficiary to become the trustee of their own trust

[44:46] rather than continue as trustee and that conversation is particular to the relationship the personalities involved and that might actually be you know it be the same as me saying hey I'm gonna I'm going to resign from this role and whoever's behind me you know or I'm going to appoint and resign the TR the attorney instead could say hey I'm gonna exercise this clause and just let them be the trustee of those trusts so that attorney and I are in conversation around whether uh the involvement as trustee is worth the time that will be dedicated to a

[45:23] fair amount of frustration and and and that's that's a hard one for me because I'm put in place by the settler to look out for the beneficiary right and if that beneficiary now it's not necessarily the case here but if that beneficiary was going to be self-destructive and becoming their own trustee I would have a really hard time even though that provision is there agreeing to that role uh to step out of that role for their benefit now that might just be me taking it too far but I'm thinking about what the settler

[45:59] really wanted for them right um and that that's a conversation that's in process and as we reach the end of the administration the the attorney and I can make a decision on that um he ultimately can make the decision but we can have more conversation about that and that might be the best role um I have a lot of sub trusts that are created that I'm the trustee that continues for their lifetime or or longer um but that's not always necessarily the case and maybe stepping out of that role is just the best for both parties um so it's hard when it's best for me and not for

[46:35] them right when my fiduciary duty is to fulfill the the trust and the Settler's wishes in that space so um yeah that that's a hard one to to know with each circumstance being a little different based on the trust and beneficiary yeah yeah you know as I'm as I'm listening to you you know it it occurs to me I I have a friend um excuse me who um because we have the real estate background we can probably somewhat appreciate this he talks about handling matters in real estate time which is you

[47:12] know do it now the best time to have done it was an hour ago but and the next best time is is now kind of thing right like it happens fast and and um one of the things I found is in um trust Administration estate Administration oftentimes that's actually not the case because there's multiple people involved and making sure everybody under even though I may have the sole legal authority to make the decision making

[47:48] sure everybody understands what's going on is is on board Etc creating that consensus takes time and so while there may be a circumstance where acting with you know absolute alacrity real estate time is is is important I I I think a lot of um our our work is actually saying let's take it a step at a time let's let's understand where we're going and and and and bring the whole team along right rather than just you know the

[48:23] efficiencies of getting it done and and that takes us certain I don't know personality maybe I'm I'm wondering what what your your thoughts are along those lines uh my initial thought is that's always very frustrating for beneficiaries but very important for trustees you know and and when you think about the role that you know when we hire an attorney to represent the estate in our Administration process those attorneys their job is to to identify all the risks for us and then often we have to decide what level of risk we're willing to accept in the decisions we

[48:58] make um is that beneficial you're going to be angry yes is it the right decision yes are they angry enough that they're going to take us to court over it and if I stand in front of the judge do I feel comfortable with the decision and can defend it right that's what we always have to be thinking about um I agree with you entirely on the time right it's different than a real estate right time kills deals that was drilled into my head by a real estate mental years ago and um and and I have a book back here uh by an author Frank partnoy it's called wait the Art and Science of delay

[49:33] I loved reading that book many years ago because the idea is the longer you wait or delay under the right circumstances the more information you have to make the most informed decision so rather than making the decision today because you can if in a month from now the decision needs to be made there may be things that develop over that month and so the collection of data the collection of opinions from multiple beneficiaries is really important and I try to articulate when I

[50:08] reach out to beneficiaries I would really like your preference and opinion on this decision right it's not what do you want me to do it's not what's your vote it's what is your preference and opinion or any information that I need to make decision right um and I've definitely over the course of an Administration thought this is going to happen at the beginning and over time that's changed and now this is what's going to happen at the end and as you know like the mechanism for us as trustees is we have a notice of proposed action right we have a nopa that we can go sometimes it's a notice of proposed no action but we're saying hey

[50:43] beneficiaries I am making going to make this decision and I'd like you all to sign off on it I've used this most in the scenario when there's a large family business you right an O overly concentrated asset in the estate right and doesn't want it to be sold right and it's when we have this duty to diversify and um and a large family asset that might be risky or just as concentration wise as huge using this notice or proposed action to get everyone to agree and sign off but waiting and seeing what happens

[51:18] is is really important you know I've had trustees or settlers in their estate plan really Envision their business going on forever oh we've got great managers they're going to run it they're going to produce profits and they'll get an incentive along the way but a transition as significant as a Founder passing really makes people re-evaluate their role and sometimes what comes to surface is I loved the founder I hated the business now's a good time for me to leave right right a loyalty that existed in there and and and now the the key manager who

[51:53] might have had a an incentive to stay it's not enough um yeah or the or the business that the settler thought was less reliant on them really was very reliant on them and so then you're going through this process of well we need to petition the court for this change right it dictates that we need to do this but circumstances have changed we need an approval on this and those take time recently I've had some beneficiaries frustrated with a claim that you know kept getting delayed in court entirely out of my hands and then after the judge

[52:30] rules in the estate's favor now there's still a 60-day appeal time and the attorneys are saying well nope you got to wait till the appeal time is done and make sure that nothing was filed the beneficiaries are going well we won keep moving and so there really is that balance of doing our job slowly methodically and intelligently and intentionally um that doesn't always jive with the beneficiaries and sometimes the assets right that's the thing you really have to be be careful of and being prudent along the way right

[53:06] we don't have the ability to predict the market or know what the Market's going to do and over the course of administration things can happen um and so it's what what reasonable steps are we taking to protect diversify ensure the trust along the way that we have to be really really clear about so we're we're we're actually coming up on almost an hour but there's one more question I want to ask you um and that is you you mentioned this before um and and uh I don't know that

[53:41] I've ever appro you know have this conversation with any other guest but you alluded to the moral aspect of being a professional trustee or being a fidu so I look at a fiduciary there's a there's a lot of ethical obligations right um whether it's imposed by the law itself or whether it's you know imposed by you know proper practice that sort of thing but but you mentioned something that's really more of a moral issue I think and that is Fidelity to the settlers of a trust and so um you know this this is me

[54:18] sort of putting on my my you know Chaplin hat for a moment which I find you know a very useful thing to do in in our world how do you you know maybe expanding on this this issue of fidelity to the gr tour or even more broadly how do you see the moral side yeah of of of what we do and and how do you deal with that because one of the things I found for example is I can't really talk to the lawyers about that because that's not their fi nothing against them and I

[54:54] don't mean this as a slam on lawyers because I find most lawyers in our space to be you know good credible people but but there is that component there so I'm curious to know how how you deal with it so from the you know the ethical side right we have this duty to the trust is what has hired us ultimately we have duty to perform what the trust is written for us to do and and I've had trust that I become the trust trustee of that I wish had been written different or I wish that settler had done

[55:29] something different um and then we have this duty to be impartial to the beneficiaries right especially and there's that's sometimes you know with different personalities and different demands and all those things being really clear about that yes there's an ethical side of this right you can't have a conflict of interest we really have to you know make sure we're disclosing and providing information and um all of those components that are under the professional code and all the duties that we have as trustees the moral side of it um I love digging into

[56:07] understanding the wishes of the grand Tours settlers as well and I do this in our you know with any client that we're talking about with in the family business in the family office but I think about it too as beneficiaries and I articulated this way my goal is that the wealth is helpful not hurtful tool not a crutch and it's never a weapon and and and usually I'm having that conversation with the grantour and the settlers in designing their estate plan and so I get a lot of the initial you know referral is an attorney saying hey have a client is updating their

[56:42] state plan they want to meet you I recommended an independent trustee they come in and sometimes they go well here's all trust can you read it and tell you know tell us what it does and I go well no let's let's start over with what do you want it to do and then I'll tell you whether the trust accomplished that or not we end up off getting into the conversation that isn't just a yeah throw me in as your successor trustee it's a does this accomplish what you want and then we get to have some of those kind of moral questions you know around is this too much for my kid right I've had that asked a lot is this too

[57:18] much and then they're going well we have you Distributing all income but is that good right well it depends how much income it is and it depends if I as a trustee can shift the Assets in the Investment Portfolio to increase or reduce the income that it produces if you want all income distributed right and so then we we so we I like getting into those conversations that are a little bit more around the how much is too much how much is enough right I've actually this is the first time I've en encountered it but a new client who's put me in their state plan where I actually think they're leaving too little to their

[57:53] kids they're leaving a massive I mean it's be an incredible private Foundation that'll continue and do really great work but I almost think they're leaving too little because you want that safety net and those unaccounted for potential disasters doesn't mean you have to distribute it all but having the possibility of stepping in to support a beneficiary in a disastrous situation it might be a health csis it might be you know unknowns that we can't actually think about that might happen in the next 30 or 40 years mm-hm so the moral question in there is um I always say

[58:30] there's there's the words that we have to follow then there's you know that question of wishes and and what do we rely on in that space recorded meetings that we had notes from meetings with the settlers and grant tours but then there's that space that might be a step too far and saying well I think this is what they would have wanted and I have a CO a couple co- trustee relationships where I have to pull the co- trustee back in who was the family friend not the professional and say just because you think that's what they wanted isn't quite what we get to do um yeah but this this moral question I I think I put it

[59:06] into the conversation a lot without addressing it as that specifically but the conversation [Music] around how much is too much how much is enough um how do we help your kids be capable independent adults in the world with this trust in existence and it's different for each person um and I love that engagement in that space But then you always have to be clear that like what ethics kind of black and white at least professionally morals aren't as black

[59:41] and white for people's different Faith experience right they can be a little more subjective and so we as trustees always have to step very carefully if we're getting into this subjective space yeah for sure for sure well that that's that's a a great note to end on so um Ka I I you know really appreciate you coming on the show today we we got to explore a lot of very deep issues and I think people will find this very beneficial once every once in a while I I you know I have a guest who who I'll I'll recommend to the viewers you know

[60:17] watch this a second time because I think you will get as much out of it through re rewatching it as as you do you know just going through it once there there's there's a lot packed in here so so so thanks thanks so much for being on the show today well thank you and your questions are are are wonderful and thought-provoking for me to get reflect on them as well and and and deep in my own process in this so thank you great you're welcome so I'm gonna have you sit tight for just a minute while I wrap up and then we can talk offline for a moment so Soh for those of you who who joined us live

[60:52] thank you so much it's always great to to know that there there's people out there uh watching us and uh I I appreciate it um so coming up this week um tomorrow at 10: am is my show business lessons from the military and I'm GNA be my topic is learn from defeat and I'm going to be dealing with the disaster that was Pearl Harbor um Pearl Harbor day is is coming up in five days so in recognition of that terrible event

[61:28] um talk I'm going to be using that as the backdrop to to look at some lessons we can learn for our business and professional lives and then on uh Wednesday at 10: am is my show people making money and I'm going to be talking about Advanced goal setting so I I'm many of you probably have heard about so-called smart goals and and and those are fine but what I found over the years of of goal setting is we need to go deeper than that and really figure out um how to set goals that will will

[62:04] really support what we want in in life and then this week on Thursday at 5:00 pm is my every other week show jiggers his place and I'm gonna be talking about the pursuit of beauty while we have a cocktail I a cocktail I made up called The Blossom elixir so um I'll show you how to mix that up and then we'll sit back and relax as we always do every other Thursday afternoon and talk about all those things in life that have nothing really to do with our professional and business lives but but

[62:39] really M you know enrich us um in so many ways not unlike what what what Kyle was kle was talking about um the moral dimensions of the work that we do I think it it makes our work so much more fulfilling um because because we can really engage with our clients on a very very deep level um and give them some sense of of peace with uh you know what what's what's happening so thank you again very much for joining us today uh one last thank you ka to you and signing

[63:16] off as I always do Marie darling you know you are my bell courage