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June 13, 2024 | Estate Planning: The Big Question

John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What to Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website in 2004, sold it in 2022, and now publishes John Rubino’s Substack newsletter.

“Getting your affairs in order” requires a lot of sometimes tricky decisions, the biggest and potentially thorniest of which is choosing someone to make sure your assets go where they’re supposed to. The lucky among us will have someone who’s trustworthy and willing to take on the job, but for many others it’s not so clear.

MarketWatch’s advice columnist “Fix My Portfolio” just offered one possible solution:

We’re in our 70s and have nobody to be our trustee after we die. How do we find someone who is up to the job?

Dear Fix My Portfolio,

My husband and I are in our 70s and trying to do some estate planning, but we’re stuck on the step of who will be our trustee. We were both previously married and each have an adult child, but neither one is capable of doing the job.

One has a substance-misuse problem and is having a hard enough time with their own life. The other is estranged from us, and depending on who passes first, wouldn’t handle things for the stepparent. We don’t have any other living close relatives, and all of our friends are our same age, and in similar declining health.

We want to hire someone, but we don’t even know where to start. It would have to be somebody we could trust to handle things when we’re dead, which sounds impossible. What can we do? — Untrusting

Dear Untrusting, 

It’s great that you’re doing estate planning and trying to find the answers you need. Many people start the process, get stuck on a step like picking a trustee or executor and put the whole thing aside. That leaves a mess of legal loose ends if you get too sick to manage on your own or if you die with things unfinished.

The first place to start usually is with a financial institution where you already have accounts and a relationship with somebody. Most of these companies have trust departments that do this kind of work. “You would never have to worry about reliability or trustworthiness if you’re dealing with an established bank,” says Joy Loverde, author of the book, “Who Will Take Care of Me When I’m Old,” which you can probably use for more of your planning for solo aging.

The important thing about hiring a professional trustee is to make sure they are a fiduciary. At a major financial institution, they certainly would be. They’d also be insured and highly regulated. You want to make sure of this because they will be handling all of your financial information – distributing your assets, closing your cell phones and cable TV service, shutting down all your online accounts, filing your last tax returns and so forth.

If your regular bank or brokerage doesn’t have a service you like, you can search elsewhere. The terms you’re looking for are “professional trustee” or “estate-administration services.” You can make contact with several firms, ask for their rate sheets and see who you like best. You want to be comfortable that the firm is going to be there down the road when you need them, even if it’s 10 or 20 or more years.

The fees will vary depending on your needs and by firm. Mostly, the terms are set by the amount of money you have and the complexity of your estate. Drew Bender, a vice president and senior trust officer for Midland Trust Company, said his office has some flexibility in negotiation terms, but generally, settling an estate is done on a sliding scale by assets, like 5% on the first $100,000 in assets, and a lower percent as the dollars go up. A $1 million estate might cost around $34,000 for them to handle.

The people who need this sort of help range from couples like you, where there is nobody left to manage affairs, to families where the named executor can’t or does not want to handle the task of overseeing the estate.

“I can’t tell you how many friends we get calls from who are named executors but don’t want to do it,” said Bender. “We take it off their hands. It’s the worst job in the world for them, but it’s easy for us. We understand the importance of it, and we’re a fiduciary.”

If a professional trustee also administers ongoing trusts that have assets, there will be additional fees, usually of the same kind a wealth manager would charge. On an estate of $1 million, Bender said his company would charge 1.25% per year of the assets under management, as an example. That would include investing the assets, managing distributions and handling taxes. Many of the cases they handle involve special needs trusts where parents will leave money for disabled adult children, but they also handle family trusts where the money is left for the next generation.

“Trusts can last for a long time. That’s an ongoing day-to-day management thing,” Bender said.

It’s good that you’re thinking about this now. It’s important to name somebody you trust to handle your affairs before anything bad happens – and that includes getting sick and dying. If both of you were to face some sort of cognitive issues or be incapacitated in some way, you’d need to have somebody ready to step in and be your power of attorney. This person could handle your financial affairs and make sure you have what you need.

If you’re unsure who could do that for you, that’s when you’d turn to a professional. “But even if family and friends are available this is a good option,” added Loverde. “Objectivity is the advantage of a professional over family members.”

Naming a professional trustee isn’t complicated and shouldn’t cost a fee until you actually need the help. You would make contact with the firm and let them know you intend to name them on power of attorney, will and trust forms. Then you send them a copy of the notarized documents, what’s known as a “conformed copy.”

“In a revocable trust, they can appoint us at the death of a second spouse. They can put us in if they become incapacitated. The trust company can basically be the standby trustee,” said Bender.

With that done, you can go live your life in peace, knowing that you’ve taken care of a huge task.

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June 13th, 2024

Posted In: John Rubino Substack

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