The Risk of Using a Personal or Family Trustee

Posted by Ned Armand, President of Eastern Point Trust Company on Nov 28, 2015

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Carefully consider the risks of choosing a family member as a personal trustee. While it may seem that they are the natural choice, it can put your estate at significant risk.

Key Takeaways

  • Family trustees can put your estate at risk due to the lack of professional experience that institutional trustees have. A trustee checklist can help understand these risks.
  • Even the most trusted family member is influenced by bias when guiding family trusts.
  • While treated as a fiduciary under court law, your family member trustee may not understand this role, which may put them at unnecessary, legal risk.

The Natural Choice

When it comes time to select a trustee who will oversee your financial affairs after your death, it's only natural to consider family members for the role of family trustee and entrust them with your financial affairs after your passing. Blood ties make them good candidates for handling your estate, ensuring that everything will be done according to your wishes without any oversight beyond the trust you've placed in them.

If a family member isn't available, or if you don't feel sanguine about entrusting any of them with such a vital role, you might want to select a close friend as a personal trustee. After all, they've known you for years; they know your opinions and beliefs and have stuck with you through thick and thin, right?

You might want to think twice.

A grandmother in Indiana was appointed a family trustee of a college fund established for her grandson by a wealthy family friend. In the eight years between the time the trust was set up and the time the boy was ready for college, it appears that granny looted the trust of more than $100,000, possibly for gambling. She's on the run and was last believed to be somewhere in Louisiana.

A trusted family member, a grandmother no less, left in charge of a grandson's trust. Now the boy has no money for college, and his entire future is derailed.

It's tough to think about a family trustee or personal trustee failing to follow your wishes after your death, but the one way to make sure that never happens is to select a trustee who is licensed by a state banking authority, with fiduciary responsibility and experience. An impartial third-party trustee with oversight by government authorities will guarantee that your wishes are followed and that those who are supposed to receive distributions get them as intended.

A family trustee or personal trustee may seem like the obvious choice, but when you think of the possible disasters that can come from failing to ensure proper oversight and ethical practices, a third-party trustee just makes sound financial sense.

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Tags: Trustee, Family Trust

A Sleeping Trust Solution

Posted by Ned Armand, President of Eastern Point Trust Company on May 14, 2015

Sleeping trusts are a valuable asset to parents who are beginning to plan for their family's future.

Key Takeaways 

  • Sleeping Trusts do not need to be funded immediately with cash.
  • Sleeping Trusts can increase the value of your existing life insurance policy.
  • Sleeping Trusts ensure that your assets are being used well.

 

Sleeping Trusts FAQs

What Is A Sleeping Trust?

Sleeping trusts, often used by young families, are trusts that have been established with all of the terms, conditions and distribution elections established; however the bulk of the funding commonly comes at a later date – usually from the estate and life insurance. You can establish a sleeping trust with Kiss Trust.
 

Why Not Have The Trust Created After You Pass Away?

The trust creation process can be complicated. In fact, the process can take months. If you wait until you have passed, your final wishes may be lost to interpretation – or worse, it could leave the door open for fraud or abuse. You will want to take your time creating the trust guidelines, and will want to carefully review the terms of the trust, personally.
 

How Can Sleeping Trusts Improve My Life Insurance?

Every year, nearly 1% of all Americans will die of unnatural causes. Only 62% of Americans have life insurance, though it is said that about 85% need it. This means that nearly a half a million Americans will die this year with insufficient funds left for their family. For the over 1.9 million who will die with some life insurance, the question becomes how prudently will the life insurance being left to your family be used and invested? Life insurance distributions are typically made as a lump sum, and if the beneficiary is under 18, the assets may lay dormant in an account that the insurance company holds. The assets aren’t invested and lose value due to the cost of inflation. All in all, it’s a bad strategy that can solely be rectified with a little preplanning. 

 

What are some of the benefits of sleeping trusts?

  • Sleeping trusts, above all, give the grantor peace of mind.
  • There is direct control over assets, even after your death.
  • A trust document in place prior to your death ensures the greatest value of your assets.
  • Terms of the trust are predetermined, instead of being up for interpretation.
  • The trustee you selected guides your trust before, and after, your death.

 

Sleeping Trusts are the Solution   

A “sleeping trust” is a simple way to ensure that the assets you leave for your family’s needs are being invested sensibly and being spent prudently. Creating such a trust can take as little time as a half an hour, and is as affordable as a dinner out with the family. Simply, you elect to fund the trust with a small initial contribution and then tie your life insurance policy, 401k and other assets to fund the trust after your death. Rest assured, the assets will only be used for the purposes you intended and by whom you intended. No ex-spouse or other party will have access to those funds for their own desires. Personally plan and prepare your family.  You know their needs better than anyone else, so why let someone else oversee the creation of a trust for your family?
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Tags: Estate Planning, Irrevocable Trust, Trustee, Sleeping Trust, life insurance

Robo-Advisors Meets Robo-Trustees

Posted by Ned Armand, President of Eastern Point Trust Company on Apr 23, 2015

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Robo-advisors, such as Wealthfront, have been making headway lately by providing their clients with an automated wealth management service. Kiss Trust is doing the same for trust funds, making it affordable for all to establish a trust.

Key Takeaways

  • Automating financial services lowers cost, which means affordable investing and financial planning for more people.
  • Betterment, Wealthfront, Charles Schwab, and others are considered robo-advisors, are disrupting the financial planning industry by bringing affordable, automated financial planning to low income individuals.
  • Kiss Trust's proprietary, patented trust software brings low-cost, high-valued trust solutions to millions of Americans, and others across the world.


Automated Financial Services Disrupt An Entire Industry


Robo-Advisors Pave The Way For Automated Financial Planning

Robo-advisors, such as Wealthfront, have been making headway lately by providing their clients with an automated wealth management service. The service goes as far as investing a designated amount of cash into a collection of Index-based ETFs. The typical use for a robo-advisor is as an inexpensive alternative to hiring an investment advisor or broker. This technology has advanced into the trust industry.

The Only Robo-Trustee: Kiss Trust

Bundled trustee services include an intuitive, self-automated trust creation process, trust documents, lifetime fiduciary services including asset management, and institutional trustee services. Bundled trust products are not a legal service, but offer individuals the power to self-create and manage their own trust fund. With the advances in technology exploding in the personal finance sector, robo-services are becoming ubiquitous in wealth management, financial planning and estate planning.

Essentially, robo-trustees take wealth management a step further than robo-advisors. Robo-advisors assist in creating and implementing investing strategies. The account can be liquidated upon the owner’s demand. The individual is then faced with the challenges of planning for use of the assets. Preparing a will or trust, planning to minimize taxation of assets, controlling the use of those by future generations, and simply budgeting use of the assets to mitigate the dissolution of the estate are worries that arise in planning for our final estate. Using a robo-trustee eliminates those problems.

An all-inclusive robo-trustee provides a one-step solution to current financial planning needs as well as final estate planning requirements. It provides a means to trust creation, investment management, and trustee services.

As a relatively new service within the last decade, robo-trustees and robo-advisors are a disruptive force in the financial services industry. They offer the chance to create a self-service trust and institutional trustee services for a small fraction of the cost of traditional trust solutions.

See For Yourself! Compare Costs of Kiss Trust vs Your Local Attorney or Bank

 

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Tags: Estate Planning, Trustee, Financial Advisor, Wealth Management, Robo-Trustee, Robo Advisor

Fiduciary 102 –– Fiduciary Duties

Posted by Ned Armand, President of Eastern Point Trust Company on Apr 18, 2015

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Understand the meaning of fiduciary duties, because it is essential to picking your trustee.

Key Takeaways

  • Fiduciary relationships are followed by a severely stric code of conduct, which is heavily enforced in the court of law.
  • Understanding the duties of fiduciaries is essential when appointing a trustee.
  • Not all financial servicing agents, such as brokers and advisors, abide by fiduciary standards, whereas institutional trustees, such as Kiss Trust, must.

 

Fiduciary Duties

Fiduciaries are an essential element in today’s financial world. Their impact is felt across the financial sector. But since fiduciary does not always describe those who manage or invest assets (e.g. Financial Advisors), it is important to understand the duties that fiduciaries have so you know whether you are involved with a fiduciary or non-fiduciary.

Fiduciary relationships must conform to the Prudent Person Rule (1) the duty to act loyally to another party and (2) the duty to care for another party. Also, no fiduciary operates without a relationship to a Beneficiary.

The relationship between the fiduciary and the Beneficiary should be “arm’s-length” and fully disclosed.  In some instances, the fiduciary may revoke access to assets from the Beneficiary. These acts are taken in the best interest of the Beneficiary. For example: The fiduciary may delay scheduled payouts when the Beneficiary is suffering from substance abuse, or facing a legal threat. In those cases, withholding access protects the assets of the Trust and preserves those same assets from misuse or the claims of the beneficiary’s creditors.

Understand that the duties of a fiduciary require multi-disciplined expertise and should not be performed by those lacking same. As stated in our Fiduciary 101 blog, an independent institutional fiduciary (trustee) is usually the safest choice when planning the management of your financial affairs.

Take the next step: Create your individual living trust, provided with lifetime fiduciary services. Visit Kiss Trust to learn more.

 Dive Deeper Into the Meaning of Fiduciary Duties

 

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Tags: Trustee, fiduciary, Prudent Man Rule, Fiduciary Duty

5 Frequently Asked Questions About Fiduciaries

Posted by Ned Armand, President of Eastern Point Trust Company on Apr 15, 2015

Fiduciary relationship

If you do not understand the roles of a fiduciary you probably should, but you are not alone. 


 

As the term fiduciary begins to circulate throughout the financial news, it may raise questions for those who don’t know what a fiduciary is, or those who don’t work directly with the term. The fact of the matter is that the term is very important to nearly everybody, and could have material implications on upcoming legislative policies. We believe it’s a good time to review what a fiduciary is and how it impacts you with a new series: Fiduciary Basics.

What Is A Fiduciary?

A common substitution for the term fiduciary is trustee. Fiduciary goes beyond that, however. The term originated from the Latin root word fidere, meaning to trust. As the word evolved, it acquired new pronunciations and meanings. From fiducia (trust) to fiduciarius, the word found its resting place in the 16th century as fiduciary. Thus, anyone can be a fiduciary. In finance, however, fiduciary usually relates to the involvement of a professional trustee acting in the best interest of their client, without acting upon any self-interest. This is called the Prudent Person Rule.

So who are fiduciaries? A fiduciary can be anybody who principally acts with goodwill, honestly, and prudently on behalf of another party (often involving money). To illustrate, a man approaching his final days, Bill, plans on establishing a trust fund for his four grandchildren using a self-help trust creation platform (link Kiss Trust or Memorial Trust). Bill creates an individualized trust and funds it using assets from his bank account, 529 plans, real estate, or by assigning the death benefit of his existing life insurance policy. Those assets are held in the trust and the trustee applies the trust rules to determine when and how the trust assets will be utilized. By doing so, the trustee will manage and distribute funds based solely on how Bill intended to do so.

Fiduciaries are becoming a more prevalent topic in the financial spectrum, so understanding what a fiduciary is and how it influences your life is essential to successfully planning your financial future.

Fiduciary FAQ: 5 Simple Questions
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Tags: Trustee, fiduciary, Prudent Man Rule, Fiduciary Duty

What Is Irrevocable About an Irrevocable Trust?

Posted by Ned Armand, President of Eastern Point Trust Company on Nov 7, 2014

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Confusion often surrounds irrevocable trusts because their purpose and definition and are frequently misunderstood and misrepresented.


 

All About the Assets

Let’s begin by defining the truly irrevocable part about an irrevocable trust: the assets. The assets, once placed inside the trust, are held inside the trust until a distribution event occurs. (An example of a distribution event would be college tuition or first-time home purchase). Once assets are placed within the trust by the Grantor, or any other party, those assets are irrevocably owned by the trust (cannot be revoked or removed) by any party and can only be distributed under the terms of the trust.

Right to Appeal

So now we know that once we place assets in an irrevocable trust they cannot be taken away, but what if the trust’s Grantor changes their mind? Or, what if certain life circumstances take hold and now there is a trust distributing assets to an undeserving Beneficiary? A common misunderstanding of an irrevocable trust is that the trust document’s terms and distribution schedules are also irrevocable, which is not the case. While it holds true that the assets may not be revoked, the Grantor may appeal to the Trustee or Trust Protector to amend the trust document schedules and its distributions. This may arise, for example, when the Beneficiary becomes unable to handle their affairs, or develops a substance abuse problem. Thus, suspending or changing the terms of the trust to deal with these issues would be a prudent decision in the best interest of the Beneficiary.

The Importance of a Trustee

It is truly important to understand that while assets will always remain in the trust and may only be used for the purposes intended, having an independent third party professional Trustee is essential to an irrevocable trust’s integrity.

Many states require the Trustee be independent in order to have the power to amend the trust. While the Grantor may submit an amendment request, the Trustee does not have to oblige if the amendment would erode a “material purpose” of the trust, or if it would intentionally erode the Beneficiary’s vested rights.

In addition, an irrevocable trust allows the Grantor to establish automatic or self-correcting amendments. For example, this option allows for design options such as a “Bad Boy Clause” where the benefits can either be turned off for a period of time or permanently suspended if the Beneficiary has become involved in criminal or drug activity. Also, “decanting” provisions (which are different by state) allow the Trustee to take the assets from the first trust and create a new trust with new or updated terms and conditions, but the new trust must generally retain the material purposes of the first trust.

Now You Know

An irrevocable trust managed by a professional Trustee provides both protection and a basis to address unknown future events. It ensures money will be used for its intended purposes. Having irrevocable assets protects the trust from creditors and prevents manipulation by family members. Allowing for amendments and decanting by the Trustee provides for more flexibility than is commonly believed possible.
 
Download Your FREE Irrevocable Trust Self Assessment Checklist!

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Tags: Irrevocable Trust, Trustee

The Importance of Being an Earnest Trustee

Posted by Ned Armand, President of Eastern Point Trust Company on Oct 13, 2014

Planning

Have you ever decided to take a trip? No doubt a good amount of planning went into doing so. You booked a flight a month in advance to get the best rate possible and seats together with all your family. You made hotel reservations and researched the hotel on Yelp to find which one had a swimming pool and was in close proximity to your other destinations.

You made dining resTrusteeervations at the most popular restaurant in town, packed your luggage, found pet sitters, had someone pick up your mail, and even made a checklist for the house before you left.

Second Thoughts       

You are now comfortably flying at an altitude of 30,000 feet and it hits you. Did you lock the back door? Turn off the coffee pot? Remember to unplug the curling iron? You asked your daughter, who had been assigned the duty of securing the house before you left, if she had done so, and the best response you were given was an unconvincing shrug while she went back to playing Candy Crush. Luckily, your neighbor (who just happens to be a fireman) was home and could take care of everything for you.

Advantage of a Professional

Having an independent discretionary Trustee is like having a safety-conscious good neighbor, who is vastly more effective in ensuring the proper distribution of assets than appointing a family member as Trustee. Unlike your daughter, who assured you everything was fine because she didn’t want to get an earful, a Trustee is the impartial professional Good Neighbor who made sure your house would be there when you got back and that everything was in its proper place.

Most people, despite their best efforts and expert financial planning, fall short at this exact point. Planning for you and your loved ones' future doesn’t do much when the asset distribution is left to Uncle Andy. While he's a good guy, Uncle Andy is no professional. He is subject to family pressures and overreacts to market swings by directing investments with either too much risk or excessive caution.

An independent Trustee has the skills, tools and the fiduciary duty to ensure the trust assets are managed and appropriated in a reasonable and responsible manner. Professional trust companies are subject to regulatory oversight, and their services are grounded on prudent, skilled and honest trust management.

Pre-planning and seeking the sensible, experienced assistance of a professional trustee will ensure the assets of your beneficiary’s trust are managed and distributed as you intended.

Download Your FREE Trustee Selection Checklist

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Tags: Trustee, Financial Planning

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