The WAY to WOW Shows
Choosing a Trustee
June 5, 2023
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[0:00] demo and we are here every Monday at 10 A.M Pacific time uh 1 pm eastern time I have to think about that on occasion and then of course an hour in for Central and mountain time and before I I get to my guest uh really the the first guest we've had on this show um I do want to remind you that that we are indeed here every week and this show is designed for people who want to learn more about trusts and Estates how they can apply that to their own finances but

[0:36] also for people who are interested in potentially enhancing their own businesses by getting involved in in this area of however it would tie into your business whether as a financial professional a real estate person Etc so that having said I'm very pleased to introduce my guest Cheryl Monk and and I'm gonna just I have a real brief bio that I put together for her and I want to make sure that I I get in the relevant points so Cheryl is a freelance reporter on business and personal

[1:11] finance she writes for a variety of national and international Publications including the Wall Street Journal which is how we got connected um and she she writes on a wide range of topics for both consumers and finance professionals including investing student loan debt wealth management the financial advisory business insurance retirement planning and small businesses so it really fits in well with both the topic that that we discuss on this show Cheryl as well as the the

[1:47] various people who would be interested in it and um just I mentioned that we met through the Wall Street Journal so um Cheryl had an article published uh back on May 19 teeth called when naming a trustee for your estate ask yourself these four questions and I I saw the article and and read it and and thought you know this is really solid advice for anybody who's operating in this realm and then when I looked up Cheryl's background I said wow you know this is even better she has a a really deep you

[2:23] know knowledge and background and all of this and so I I quickly uh contacted her and she was kind enough to agree to to come on the show so Cheryl first of all welcome to trust in Estates weekly thanks for coming on thank you so much for having me yeah very excited to be here I think well that's good so um you know let's just if you don't mind kind of jump right into um the the topic that that your you know article covers which is um preparing or choosing a trustee I I I want to set it up because one of the I

[3:00] think people I've mentioned this on the show before I think when people here is State they think like oh I must have some you know mansion in the you know English Countryside but these days where you know if you own a house you own a a valuable asset I mean the median home price in in the US is what slightly under I think four hundred thousand dollars so you know that's that's a substantial asset and it may very well make sense for people to use a trust to avoid probate and so then they're faced with choosing a trustee so I think this topic

[3:37] applies to a much broader range of people than you know might otherwise seem to be the case well I also just want to jump in there because one of the things I was we had to be really careful about when writing this article is I think people get confused because there is such a thing as a living trust and then there are trusts within a will and those are really two different things and so a living trust is probably going to be most appropriate well it can be appropriate for a lot of different reasons but I know for example like an hour I'm in New Jersey in our state it's not such an issue the probate is not such a big deal but in a state like California

[4:12] probate's just like really a horrible process and so basically you need a living trust there to be able to um disseminate your assets after that but there can in a will even just in a regular will let's just say you don't have something called the living will or living trust I think it's also called um you can do trusts within a will such that your children don't get your money out right so that would be an example so let's say you have a million dollars and you have two children you don't want to give those that million dollars out right to the children you can set it up

[4:48] to go into trust when you die so but they're talking about it it's the same concept because you still need a trustee either way but I just want to be clear that there are we can be talking about two different things okay yeah and I mean and that's a great point and as well um you know one could set up uh like a Special Needs Trust right in advance like if you have a child you know for example who maybe is you know is neurodiverse or something like that so then you may even set it up right in Van in advance of of passing away and and this but the issue is again you still

[5:24] have to have a trustee um and it doesn't necessarily have to be a huge amount I know my daughter has a a trust that was set up for her by her grandmother and it was funded with you know a hundred thousand dollars which you know again not not the millions we sometimes think of when we think of trusts in the states right well I think that's actually a really interesting point because I don't really have that much like you were saying before you know maybe they'll sell the house at some point after your this whole house will be sold so what's going to happen to those assets and you want to be I I would

[5:59] think people would want to be able to say what happens to their assets after they die but the statistics are pretty shocking and I don't actually have them in front of me but um the statistics in terms of how many people don't have a will are pretty shocking they're pretty high up there so which means that people don't have trust because they don't have will so or yeah yeah I I mean you know it it's an interesting point because um when I was in the military so one of the one of the first things they have you do require you to do really before

[6:34] they'll let you deploy especially into a combat zone is you have to have at least a will right um and it's amazing you know here here are people who are at least ostensibly you know working in a a you know a a job that has existential consequences right and and uh you know they most don't have wills and a lot are young of course they think what do I need this for but you know otherwise if you don't have a will or a trust or something then you're really at the mercy of whatever the laws of the jurisdiction that takes you know that that takes over is says you have to

[7:11] do it can cause a lot more fighting among your heirs I mean assuming you have errors but even if you don't you're gonna have someone to give it to and it's it's it really is a problem it's just much easier it's much cleaner um in most cases to set things up in advance yeah and in those cases because they're gonna be fighting but after death but it's still better than not having something yeah and I think it's pretty easily done these days to have a simple will it's not expensive yeah so so let's let's sort of move into um the the subject then of of choosing a

[7:46] trustee because I I you know having been a trustee myself it's it's not so obvious um you know who what kind of qualities that person needs to have and and what's really going to be involved so maybe if you wouldn't mind start out by talking about some of those issues like what does a trustee do and and how does that then relate to the qualifications that someone should consider you know when they're choosing a trustee okay so the trustee is going to be responsible for making financial

[8:22] decisions related to the assets that are held in the trust so it it could be you know for a very simple estate it may be so you know maybe just let's say a house or maybe it's just you know like you said mentioned before a hundred thousand dollars maybe something like that but in a very complicated estate you could have real estate you could have multiple cars let's say you were a car kind of connoisseur there could be lots of different assets could own apartment buildings in real estate you can I mean you could be an apartment owner for example and have that within your estate there are lots of different things that

[8:57] trustee could be responsible for doing um and it could be there could be a lot of um you have to be in charge of the financial aspects of the trust and then also if you're going in their assets and you'll have to find a way to manage those assets whether that's for yourself yourself or hiring a third party to do it so there's lots of lots of lots of moving parts so you're basically the overall caretaker of anything that is held in the trust exactly exactly but that's not a job for everybody because I mean you had no if

[9:33] you have no Financial background um it's just not going to be as easy um one of the it's an I'm not an attorney but one of the attorneys I spoke to when I was writing this article was giving the example of a of a young person and nothing against young people and their financial prowess but let's say you're an 18 year old and you don't have any Financial experience maybe you've taken a personal finance class in high school hopefully more high schools are doing that these days it's a great thing um but let's just say you have really no Financial experience how are you going to know how to manage hundred thousand dollars a million dollars two million

[10:09] dollars whatever that number may be it's just not necessarily realistic and on top of that you're gonna have to deal with accountants and lawyers and financial advisors potentially like there's a whole bunch of professionals that you're going to have to deal with it's just not an easy job and it's not something if you have because if it's a very small trust maybe but if you're talking hundreds of thousands or millions of dollars you really need to think in my opinion you really need to think twice about whether or you know the 18 year old is the right person to put in charge of that money well yeah and and you know I think about

[10:44] my my daughter isn't she's not 18 but she's going to be 16 soon and and so you know in another couple years she could you know qualify to be a trustee and she did she is taking personal finance you know in high school this year and and and it's you know I've helped her with it a lot so it's just that experience alone I don't think she would be particularly comfortable doing it plus there's the whole side of sort of knowing what you don't know and then being able to ask intelligent questions of your advisors right so how does someone who's an experienced deal with

[11:19] that right and there's a whole other aspect too because if you're dealing with a let's say you have your asses are going to two siblings and one of them is 18 and one of them is 15 and you make the 18 year old the trustee that really potentially pits the 18 year old against that yeah the sibling and that really could be a bad situation um so those are just there's so many factors that go into it is it's not an easy decision by any means and sometimes people just don't have those familial relationships to be able to name someone who is in the family as

[11:54] a trustee okay so so so that being the case then aside from having the knowledge and maybe the experience what other issues is it important to consider as you you know as you choose or or you know interview trustees or you know whatever whatever process you know someone's going through well it sounds like um a kind of an obvious thing but you want to really make sure you trust the person um you know one of the attorneys I interviewed was telling me a story and

[12:29] it's in my article but um it was about basically a if I remember right bear with me um it was this um but in any example it could be it's similar examples could happen you know the brother named his brother as a guard as a trustee for for the estate but the brother did all sorts of things like buy and it was a it was a some kind of a and a shipa um oh my gosh what was it called what's it called one of those um oh my goodness I can't think of the name um it was a well whatever he bought something that wasn't really that wasn't

[13:04] really appropriate and wasn't really going to be benefit the sun it was jet skis that's the word I was looking for sorry jet skis and you know that you're hard-pressed to say how that's going to benefit the two-year-old um and so was the brother you know he I think that maybe he felt that it was going to be something the family could use later on but even if there aren't you know ulterior motives and like negative things like you're doing it let's say you're you know you're the trustee and you want to go buy a motorhome maybe you really do have a good motive because oh you think that's a great investment but at the same time if that's not going to be in the best interest of the child everyone you're

[13:40] not doing your duty and number two you're really not you're really not that's not the intent the person had in naming you the trustee so you really just have to be careful that the person you name is going to be someone who will really follow your wishes and and and that raises a I think a related issue which is um a trustee acts as a fiduciary and we we hear this I mean for those who are you know fans of the movie Mary Poppins you know Fidelity fiduciary bank that's what goes all the way back to then my knowledge but the idea of acting for the

[14:15] beneficiaries of the TR of the trust or the estate you know outside of any other considerations there there can be some very specific aspects of that right that that um the trustee has today absolutely absolutely and that's all well and good when the person's willing to when understands that they have that fiduciary responsibility and follow that fiduciary responsibility now of course they're they're supposed to do it it's it's not legal not to do it when they if they don't do it you still

[14:50] have to go through the whole headache of free living or not doing it and you know it's a whole legal headache and meanwhile there are legal fees that are coming out of the trust to Def you know for the trust the person to defend himself or herself so it's it and that's it look you never know when you name someone like you hope you're doing the best thing right but if you know that your brother-in-law has a history of drug abuse or has a history of like you know he's been I'm sorry just making things up that like he's been in jail for stealing like Rob good idea to name him as trustee

[15:27] I mean you know interestingly enough I'm dealing with the situation right now where the trustee has been defraying funds in a trust um not it appears not for the benefit of the minor trust the minor beneficiary right and and you know and talking to my lawyer about it um you know the solution could be as expensive as you know the misuse of of assets right I mean that's that's the reality of of that that kind of thing today so so so we you know we want someone who is

[16:04] trustworthy we want someone who has um the knowledge and experience as well as shall we say the willingness uh to be a trustee um what else would you you know look at in terms of of choosing a trustee well so I don't think we can look at this in a vacuum so sometimes you don't have anyone for example who meets those criteria exactly but let's say that those that per there's a person you have in mind who has an amazing relationship with your children and really knows what you would want for your children and how

[16:40] you would want your money to be spent on the children there's can't name that person as a co-trustee and then hire let's say a professional trustee such as a bank or a trust company or even a private professional who's a who's a trustee if there's something saying you can't do that or maybe you have an attorney who could be a co-trustee with this other person who just really knows the family so that's another consideration as well so kind of create a team if you will um exactly and and so so the benefit

[17:15] then is is you can pair sort of family knowledge and insight with with skill or what might be the downsides to a a co-trusty Arrangement well in a cultural City Arrangement you need to have agreement they need to act together and so um the great example that an attorney gave me was that if you name two sisters to be co-trustees and they can't be in the same room together then basically what are you doing like you're not making if they can't agree then and they have the history of not being able to agree then you're really you know

[17:52] you're setting yourself up for failure but if you name someone who's a professional and you name someone who you know has your children's best interest in heart because they know your children and they know your family closely then it's not so much of a disadvantage but you really want to make sure that whoever you name as a co-trustee is going to be able to work together right and would you recommend perhaps um having the two potential co-trustees meet ahead of time and and kind of see how that interaction goes or is is

[18:27] yeah so like I I I don't know how I never thought I mean we did our own will like we never really thought about that but we did something to ourselves like oh well what would happen if in this case in this case I think I mean some of these things like you think about to the extent possible but you can't come up with every possible thing that could go wrong you try and come up as many as possible um I think truly just a matter of thinking things through to a group to a large extent and kind of you know bouncing ideas off like you know if you're if you're making it with somebody else or maybe bouncing it off a professional saying hey I'm thinking of doing XYZ and naming these two people

[19:04] maybe just bouncing it off your attorney because maybe the attorney can say to you well you know do these people get along do these people have experience and there may be other questions that come up um in the course of those just conversations that may make you think you know one time when we were doing a whale years and years ago we were naming um my father's trustee or and one of the or we were talking about naming him as trustee and one of the things that the attorney mentioned as well you know you need a second trustee and you need to make sure that the person like things that you're thinking about think of age

[19:39] because if you're naming someone who is much older at the time you're naming them and you want your will to last five ten years is that going to be feasible as well right if you're if people have to redo their Wills right you can't expect to have to create a will and then set it and forget it but you want to at least be able to last ideally five years so let's just take that as a roughly five years but if you're naming your 95 year old Aunt as a trustee and she's the one that you're relying on maybe that's not such a good idea and these things sound like common sense

[20:16] but people say but but I really love green on so and so and she loves my kids and people just sometimes need a little direction to be able to name the appropriate parties got it yeah I mean and and it absolutely makes sense I know um when when I set up my trust um you know my friends who are my peers they're all the same age as me and and the idea of pointing them as a trustee didn't seem to make a whole lot of sense because if if I'm getting to the point where the I I'm dying and leaving whatever so there's a good chance many

[20:51] of my friends might have or be or be at the point where they're not fit so I reached out to a friend who's you know Navy colleague who's considerably younger than me and and I said hey look you know would you would you be willing you know to be uh the trustee and I said and he said why are you asking me I said well hey you know finances because he's he has a real estate investment company me and B frankly you're you know 25 years younger than I am so you know it seemed like a good match and that's the other thing to consider though is these things don't I mean you want like when you write a will or you write a trust you don't want it to be

[21:26] something that you're going to have to rewrite tomorrow but you really do need to keep in mind well this is going to be we want this to get us for the next five years and then maybe that's a different discussion in five years or ten years it may not be that same trustee that you use today you might not want to name that person in 10 years so you don't necessarily when you're naming someone you don't necessarily that person doesn't necessarily have to be the person that you would name for 50 years um you know because because you should review it be reviewing your will and obviously you want to get it right the first time it's circumstances do change

[22:02] and I wrote another story and an attorney had told me about an example of you know they named the aunt um or something something that or even as a guardian maybe virtual but then at some point that I was just too old to do it so these things have to be fluid and adjust sure sure now um a few minutes ago you mentioned the idea of of either as a trustee or as a co-trustee a bank or maybe a professional an individual who's a professional fiduciary or something so would you talk a little bit

[22:37] more about what those are and how those work and and and what you see as being sort of perhaps the um more appropriate situations for for them sort of comparing contrast maybe if you will sure so the professionals like a bank or a Trust Company a lot of it's going to depend on how many any of your asset size you're not going to want to go to a bank if you have a very very small estate um you know the people I spoke to for the story I wrote was saying that basically a a bank is is good generally for a larger trust so around 5 million

[23:14] or higher okay and the idea of having that dedicated trust administrator who's a professional it can really offer that peace of mind that the state will be handled appropriately for a long time because once you know it's a you can have a trust for a long time and then for the um you'd have that kind of ongoing Administration if there's someone if the person working on the account is not available you have a whole bunch of sort of people around you who are also able to be working on it um so so that's the advantage there a

[23:49] Trust Company maybe someone in the one million if for a trust in the one million to five million range is a general rule of thumb I mean these are not absolutes I got a letter from a reader saying you know you said one company you know don't use trust companies and he mentioned a trust company but how do they trust in it I said yes but that happens to be a bank also so the choice company it's not you know there are there are big trust companies that have trust in the name but in that case if it's all they do it's more like a bank in that respect so you're running away it's a little confusing to people and I can see where

[24:25] people would get confused but the the big Bank slash trust company is really going to be the for the bigger the states and then you're gonna have for this even be a smaller Trust Company you know I don't really want to mention names I don't want to look like I'm recommending one over another but just you know just because it says it may be a very large bank with a trust operation but you hear the truck but it has trust in the full name of it so that doesn't you know I hope that was clear yeah yeah for sure for sure and and um would would a wealth manager

[25:02] um be an appropriate trustee for a trust do you think or or should that should they be used more as kind of a uh if you will almost like a consultant or an ally professional that the trustee relies on for specific that specific skill it depends on the wealth manager I mean certain companies have certain wealth managers have trust companies within them I mean I don't I didn't look into that specifically so I'm a little hesitant to go down that road I know that there are wealth man large wealth management companies that have trust divisions and I think that would be okay I would be a little bit more careful about using my you know my small wealth

[25:40] advisor who is a one person shop to be the trustee I think there's a lot of the whole idea of a professional some of these bigger organizations is that they have a lot of checks and balances to protect your money um if you're dealing with like a very small operation even though they're supposed to be fiduciaries the fewer the checks and balances the more risk there is to your money so I think if you're if for me if I were gonna go with a professional I would want to go with a company I'm number one a reputable company that has a lot of checks and balances in place that would so I would know that my money was going to be

[26:16] protected um that's not to say it wouldn't be um but a lot of interestingly I was told when the reporting of this article that a lot of independent lawyers um and wealth banners won't do it anymore for that very reason because you do read in the news these horror stories where you know so and so lawyer siphoned off so and so's trust and obviously that wasn't the attention it was a bad apple and I'm not saying lawyers are bad I'm just saying that you know there are situations but and you can never really be a hundred percent sure but if an organization has a lot of like I said these checks and balances

[26:52] it makes it a little bit more secure right so and in here in California we have a licensed uh profession called a professional fiduciary and so you know and I guess that that's not true in all 50 states by any stretch I think it's maybe between 10 and 15 states that have that although it appears to be growing and and I I suspect that's coming out of the this this issue where you know individuals would handle Estates and and the next thing you know that the beneficiaries have been left without

[27:27] anything because they've you know siphoned off the money and there was there was nobody you know watching over what they were doing um you know that that could exercise that oversight that you know to keep to keep things right you know on the up and up so to speak so exactly um you'd asked me before about some of the advantages and disadvantages so I think I gave you the advantages the disadvantage really could be could come down to cost so a bank and a Trust Company May charge um between 0.5 and 2 of the overall value of the trust which could be a

[28:04] hefty amount um or if they don't re if you don't reach that level the minimum fee to handle the account might be between 2500 and 5 000 so I mean the fees can add up so you but you have to decide but but trustees also like if you have just like a regular like a you know your mom does it like she's also able to take a fee so you just have to kind of weigh it sometimes in these really especially really really big Estates the fee could just end up being a drop in the bucket there's always fees involved so if you especially if you plan to pass the

[28:39] estate down from generation to generation to generation you know it may really just be that a professional trust company or bank is really the way to go notwithstanding the fees right and and at least that way you have sort of the the continuity number one and and you keep that that corporate knowledge um within the you know within the organization right so okay um now um I don't know if you didn't necessarily cover this in the article um however I I thought I would address this to to get your thoughts so what is the res what is the trustee's

[29:15] responsibility um once the trustee is managing the trust in terms of reporting or or or anything like that how how does how does that work um because it could be for example that that you know you're still like in a Special Needs Trust for example you may still be alive right you set up the trust for your child but you're not going to be the trustee you were just the grantor so what responsibility is there then for for the trustee to report periodically either to the grantor or to the beneficiaries or or you know like a

[29:52] guardian on behalf of the beneficiary something like that so that's an area where I don't have a lot of familiarity but I can just say generally that it is going to depend on the trust um I mean they're going to be reporting requirements but I think it's going to depend on the trust and the type of trust and and frankly the Assets in the trust to see exactly what those reporting and other requirements are so so so it sounds like that's you know when the trust is being written that's an that's an issue you want to address to to your lawyer or or you know the the individual that's drawing up the

[30:28] paperwork is how often is information going to be required of of the of the trustee think so and also just you know kind of to lay out exactly especially if you're asking a friend or a family member can you know it's a good idea to say can you tell me exactly what the responsibilities of the trustee are going to be for my particular estate because again it's going to be different depending on the assets like if I just have a very straightforward if I have a house in a car and a dog it's going to be very different than if I own apartment buildings and I manage multiple properties and I'm you know I

[31:03] have all these other things within the trust so I think it's always a good idea just to say you know what's going to be involved and some of that's really going to depend on the assets that you have in the trust yeah absolutely so I'm I'm glancing up here actually we're we're coming up on our um 30-minute time limit so um I I just you know before we sort of wrap this up just want to give you an opportunity to sort of you know any any final thoughts you have on this subject that you'd like to share I just want to say that I really think it's important because there's just so many people who don't go through this

[31:39] process and I really just would I can't stress enough how important it is to think about these things ahead of time you're really doing yourself and your family you know your future Generations a really big disservice if you don't think about these things and you're doing them an amazing service if you are thinking about these things ahead of time and it and look you've you've worked hard your whole life and you've you've gathered and you know have a lot of assets potentially or even if you don't have a lot of assets you still have assets and you want to see those passed on how you would like to see it so I think it's just very important to

[32:15] number one have a will or a trust and if you have a living trust make sure you put the assets into the living trust don't just create a trust but make sure you transfer the assets in but also really think you'll think long and hard about who the people you are that you're choosing to help execute your wishes after you're gone I've seen it's very important great I I think that's a that's really a good way to sum it up so thank you Cheryl very much uh um let's see I I know you can be found on on LinkedIn for people who want to follow you um are you on

[32:50] um other social media for people who want to follow your work Twitter Twitter as well okay yeah so and I post I post all my articles on LinkedIn and Twitter okay great so yeah so uh and I'll I'll put um those links to yours to your Twitter and Linkedin page in the show notes so people can have the ability to follow you um and and I I noticed when I was looking at your LinkedIn profile earlier today you've all there's already several more articles that you've written on I think very timely topics that we all need to know about and I mean my

[33:26] daughter is fortunate in that she had um you know Personal Finance in high school but I know I never did that was that was before my time I had wood shop you know so again sure so so Cheryl thank you very much before we before we sign off I just want to um mention that um tomorrow Tuesday is my my Regular Show Business lessons from the military and and that is at uh 11 o'clock Pacific

[34:02] 11 A.M Pacific Time 2 p.m eastern time and then on Wednesday is people making money and that's kind of the broadest of my shows it's it's all issues related to Career business finances and wealth management and and and I'm sorry uh um building building wealth and so that show is at 12 30 p.m uh Pacific Time 3 30 p.m eastern time and you can also go of course to our YouTube channel where all the shows including this one with Cheryl are available for viewing and would encourage you of course to

[34:38] subscribe and then anytime a new show comes on you'll be able to to watch it so Cheryl again I just want to wrap up by by thanking you very much for spending this time with me today um and I I it's a it's a really important topic as you mentioned and hopefully you know as time goes by we'll you know have you on again and and we'll we'll touch on some of the other topics that you deal with that'll that'll help people out um as as they pursue their financial lives looking to make good decisions well thank you so much for having me this has been a lot of fun great just

[35:14] signing off as I always do Marie darling you still are my bell even when Cheryl is here on the show with me so thanks very much for watching folks and we'll see you soon