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Trusts, Wills, and Estates: War Stories from a Career Trust Officer

Category: Estate Planning

April 12, 2021 — Today we are fortunate to have an interview with Jim, a retired vice president and trust officer  at a large Pennsylvania bank, who spent his entire career administering estates of all kinds and sizes. We think you will find his real life examples of what to do – and what not to do – in estate planning very useful.

The tips, advice, and experience that Jim brings to this important  topic is critical, since inevitably, everyone needs an estate plan. Jim believes that only about 50-75% of people of retirement age have an estate plan of some kind. Most of those folks have wills, while a much smaller percentage have trusts. As he pointed out early on in our interview,  even if you think you don’t have an estate plan, you actually do. That is because in the event of no will or trust, the government has rules about how your assets will be divided after your death. The problem is that it probably won’t be distributed the way you wanted it to be done.

How does the trust process work and how are they different from wills?

Jim: A trust is a document similar to a will, but it is private. Trusts do not have to go through probate (hence the term avoiding probate). A will or a trust can be destroyed or changed at any time. A will can be discovered as public information, which could be embarrassing. With a trust only your attorney and trustee know what is in it. Another advantage of trusts is that they are faster to settle.  With a will you have to advertise, and can’t safely distribute the assets before the end of that period without taking a risk that a creditor might surface who has to be paid. The amount of time you have to wait depends on the state. Tax issues are usually not going to be too different with either option.


How do you set up a trust?

Jim: Trusts are normally set up by an estate planning attorney. He or she will provide guidance and advice. The document is drafted and then signed with witnesses. Then all of your assets except personal property are put into that trust, which now owns the assets. It is possible to set up a trust yourself using an online program, but it would be extremely risky.  

How does a bank or other expert like an attorney handle a trust if they are appointed executor?

Jim: If a bank is appointed executor it will pay debts, distribute the assets, and pay taxes.  No matter who is the executor, distributions can be set up anyway you want – all at once, periodically, at a certain age, etc. Bank trust departments tend to be compensated by a percentage of the assets, often 5%, and usually less on larger estates.


Who should you choose to be executor of your estate?

Jim: Whoever you choose should be impartial, intelligent, and not easily influenced.  People often choose a brother and sister, but that can create problems as you both age. Someone from a younger generation might be a better choice. Being an executor is a lot of work, and might be a serious imposition on a volunteer. Choosing a bank is often a good choice because banks are impartial and have experience doing this. If the executor or administrator gets hit by a bus, the trust department will have someone to take over. Jim admitted that bank trust departments often tend to get problem situations, such as large estates or where problems are anticipated with heirs are anticipated. For couples without close relatives who could be executors, banks are ideal.


What are the best things to do when setting up your estate plan?

Jim: One family I remember did very well in life and had created substantial wealth. They were worried that their son saw that and would feel entitled and never develop on his own. So early on they told him, we will pay for your education, buy you a car, and provide nice gifts, but that is all. Don’t expect anything after we are gone.  The kid turned out great, and is now taking the same approach with his children.


What are some of the worst mistakes you have seen in estate planning?

Jim:  Overall, when you write your will or trust you have to remember that after your death there is no second chance to change your mind. So think carefully and get good advice. You can always change your mind, so go back and look at your plan periodically.


A mistake I have often seen is not setting age or time provisions for distributions. For example, if a child is very young and you give him or her a big chunk of money, it might be gone really quickly. A better idea is to give a fraction every so often, and/or at certain ages. 

Not being fair can cause problems. I remember a father who left everything to a daughter who was not married, and gave nothing to the son, who was married. The father told me that the son would look out for the daughter. I advised him that this wasn’t fair, the son is going to be bitter, and maybe not so eager to look out for his sister.

Even when you try to be fair bad outcomes can happen. For example, heirlooms and other family assets carry emotional weight and tend to bring out the worst in people. Old grievances re-emerge. I have seen cases where some of the heirs never spoke again. It is best to stipulate in writing exactly what is going to happen to avoid problems down the road.


I once had a case where the parents of a young child were killed in an accident. The trust said he got everything when he came of legal age. At 21 he got the money and went through it quickly. When other relatives complained that all of the money was gone, there was nothing to be done.

What about issues that come up with mixed families and second marriages?

Jim: These are tougher issues and I have seen many problems. An interesting example I had was a widow and widower who married late in life; the new family had four grown kids.  The trust was set up so each child got one fourth of the estate. Then the wife died, and the husband changed the trust so his stepdaughter only got a lump sum of $50,000, which favored his natural children. The other kids continued to split the original bequest. Ironically, the man lived a long time, taken care of by the stepdaughter. In the end he had spent almost all the money in the trust. The stepdaughter got her $50,000, but as the residual beneficiaries, the other children found there was almost nothing left for them. 


What should someone with a special needs child be concerned about?

Jim: If the child is a ward of the state it will pay for their basic care. If you leave money to that heir it will have to be spent  down, so the assets are best left to the other children. A separate trust or arrangement could be set up to provide additional money to the special needs child. Adult children who need help but are not institutionalized are more difficult to provide for. You need talk to an estate planning attorney in the state where you live to help handle this.


Any parting advice or comments?

Jim: Beneficiaries of an estate have to understand that the assets will be distributed exactly how the will or trust says.  It is in writing, and that is how it will be done. I was frequently surprised by how many intelligent people don’t get this, and end up getting upset and spending money on legal challenges, but to no avail. Logic seems to go out the window in so many cases. Just because your neighbor’s sister-in-law says it is not fair, the will controls the way it will be. I have seen these types of situations come up on Topretirements blog comments.


Just to show you how bizarre things  can happen, here was an interesting case with divorced parents who died. Each child got about $10,000 on their 21st birthday.  One day of the children called me up and asked how she could get her money, now that she was 21, and she wanted it quickly. She arrived to pick up the check with four friends. Outside the car was packed for spring break, the financing of which was probably not in the mother’s plan. Spacing the money out might have been a better idea!

For further reading:

Bottom line:

Thanks for sharing your experiences with us Jim. I know I learned a lot, and hope Topretirements Members will do the same. Please share your thoughts and experiences in the Comments section below.

Posted by Admin on April 12th, 2021

11 Comments »

  1. What great comments on a critical topic. I found that the hardest part of having my trust prepared was determining who would be the executor/successor trustee. I had to conclude – unfortunately – that no one in my family would be either qualified enough or patient enough to implement some rather complex distribution provisions in my trust, and I didn’t want to saddle any of my friends with the job. I named a professional fiduciary recommended by two local trust attorneys, and while I’m sure he will implement the provisions the way I want, his fees are quite high and are charged annually during the distribution period. Reading Jim’s article leaves me wondering if I should contact a bank trust department to see if their fees are lower. Thanks again for a great article on a really important topic.

    by Joann C — April 13, 2021

  2. I would suggest working with an estate lawyer to plan this all out. Five percent for a bank seems pretty high. Choosing an executor is crucial — whether a bank, an attorney, a child, another relative or a friend. Look at how much this will cost depending on who you choose. I heard from a friend about a situation in Idaho where a widow who had inherited a sizable sum wanted to spend a third of it on a condo and spent months fighting the bank to get the money (note: I can’t vouch for this, as it’s second hand). I would start with a seasoned attorney to go over the pros and cons of every possible choice. They have seen it all and can help reassure you and offer peace of mind. Having been through this twice, get one who will be on your team and who will act in your best interest.

    by Ed LaFreniere — April 14, 2021

  3. I’ve been meaning to update my will and living trust – this article has inspired me to call the lawyer who set it up originally – thanks for the reminder!

    Now I’m wondering if credit unions do the executor thing – think I’ll make a few calls and find out – my only bank business is my mortgage – all else is with credit unions.

    by John — April 14, 2021

  4. John – Please let us know what you find out. We do ALL our banking with a credit union, mortgage included! I’ll try to find out from mine as well. It would take a lot of pressure off the kids or other relatives we might think would want to “help out.”

    by HEF — April 15, 2021

  5. I have personal experience with a will and trust for a man with 6 married kids, one of whom bad self-inflicted financial (and life) problems. The father spit all assets equally among the 6 siblings, but bypassed that one sibling and left his share that sibling’s 6 kids. Very much feared that sibling would either instantly waste the money, or it would be paid to creditors. That sibling finally straightened up his finances (and life) to the point the father amended the estate documents so that sibling got his share directly. The beautiful thing was that sibling knew (knows) nothing about the father’s original arrangement…he straightened up on his own without inheritance threats waved over his head.

    Also, same situation, the troubled sibling has been left out of the successor executor and trustee listings, as the father felt there was too much risk of a relapse and subsequent bad decision with all the sib’s inheritance.

    A lot of things can be done in estate planning to protect someone’s wishes.

    by Greg W — April 15, 2021

  6. HEF – Financial institutions that offer trust and estate services must have trust power authority from a state or federal entity. The best way to find out is just to call the institution and ask. I am not aware of a credit union with trust powers. After practicing law at the beginning of my career, I became a trust officer at major banks for 18 years. And just because a bank has trust powers, don’t assume they’ll be great at administering estates. It’s probably better to use a bank with an actual trust department that has been administering estates for many years. Sometimes attorneys will serve as an executor, and if you have confidence in the attorney or law firm, this may be one way to go.

    by Clyde — April 16, 2021

  7. Our family had a son who had many troubles including drug addiction. He frequently asked our mom as well as other family members for financial help. When mom died she left her money directly to all the sibs and created a trust for the son, to be administered by one of the siblings. That proved to be very difficult, so the sibling who was the administrator assigned the trust to a lawyer, and that worked out a lot better for everyone.

    by Rick — April 17, 2021

  8. AARP conducted a survey a few years back asking Seniors what was their number one “Regret” in life. The number one regret was that they “Worried too Much” about everything. As I read the comments here, I saw a lot of “Worry” about things after one dies. Really?! Things will change after one has departed and the departed cannot make any adjustments.

    Aside from having a Will, which is necessary, but having a Trust for “MOST people” is a waste of time and money. Unless one has a very complex financial situation, you do not need a Trust as many people are led to believe by organizations/lawyers that profit from creating and managing Trusts.

    Also, all that crap that Seniors have acquired over the last 50 years and being stored in their shed and two-car garage are no longer collectables. The younger generations don’t want it. So, that stamp/coin/train/beanie baby/toy/crystal/grandma’s antique/etc. collections have no meaning to them. Research for yourself. Go visit antique dealers and try to sell some of it to them. Surf the internet and see the tens of thousands of stuff that people are trying to unload. Good luck!

    If one is not part of the “Complicated” financial situation groups, just add the names of the people you want to receive your money after you have departed to your account(s) (bank accts, IRAs, etc.) as beneficiaries or as joint owners. (If one does not have any family members that can be trusted, then one has a different set of issues.)

    Keep things simple. Your beneficiaries will love you for it. Use a Will and other documents to take care of everything else.

    by Roland — April 20, 2021

  9. Roland, I wholeheartedly agree with your assessment of various collectibles. Beneficiaries need to understand that something is only worth what somebody is willing to pay for it. Just because Grandma says the Hummel figurines or some other collection is worth a lot is not necessilary true.
    If you, as a bene, don’t believe what the executor is telling you a collection is worth have your own appraisal to prove to yourself what the items are worth.

    Jack

    by Jack — April 24, 2021

  10. John,
    After thinking about our interview, I would sum up our discussion by advising individuals to really think about and understand how they want their estate to be distributed, work with a knowledgeable, experienced estate attorney and once in place, review your estate plan periodically to ensure your estate plan properly reflects your wishes.
    Jim

    by Jim — April 24, 2021

  11. I’d like to suggest one other thing to consider in your estate planning – your pets. If you don’t have a friend or family member whom you can trust to give a good home to your pet for the remainder of its life, consider that after you pass, that pet will likely end up in a shelter and who knows what will happen then. As a single with 3 dogs, two of them special needs, that’s my biggest worry and it was a huge part of my estate planning. If my sister will care for them, all is good, but beyond that, I have contacted the directors of two rescues that I trust, and have reached agreement with them about caring for my dogs. I have set aside money for their care, as well as a significant “bribe” if the rescues will take them and use high levels of due diligence to rehome them. I really don’t care what happens to the rest of my estate, but being certain there was a plan in place for my dogs was a big issue for me, especially during Covid.

    by Joann C — April 25, 2021

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