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SENIOR ADVOCATE

By Liza Horvath

 

Hidden Bank Policies

 

Tom and Susan Madison were loyal to the group of money managers with whom they had worked for decades. The group had prudently advised them over the years and, as a result of good advice and hard work, the Madisons had amassed a considerable estate. When it came time to choose a trustee for the family trust, the Madisons naturally turned to their financial advisors. The advisors were part of a large bank with a trust division, so the Madisons named the bank to step in as trustee on the death of Tom and Susan or to help should they become incapable of managing their own finances. This way, the Madisons believed, they could be sure that their trustee would continue to rely on the good advice of the money management team – just as they had for so long.

 

After Tom’s death Susan continued to manage things well but, as she began to succumb to the effects of dementia, it became clear to her children and the advisors that she could no longer handle the family finances.

 

The Madison’s children took the medical and legal steps necessary to determine that Susan was incapable of managing financial assets and turned to the bank to step in as trustee.  

 

However, as it often happens, the best made plans did not come to fruition. For various reasons, the bank did not step in as successor trustee. Susan wanted to stay at home which would require her to have caregivers and the bank’s policy did not allow them to employ in-home caregivers. Further, the bank’s real estate management division was in another state and it would be costly and difficult for the bank to maintain the Madison’s home and address the needed remodel to make it safe for Susan to live at home.

 

The Madison trust named another bank as the successor trustee and, when the first bank declined to step in, the other bank’s trust division was happy to step in. However, the successor bank required that the investments be moved to their bank which would mean that the longstanding relationship with the Madison’s money management team would be lost. California’s trust laws do not allow a trustee to completely rid themselves of liability if they employ an “outside” money manager, so the second bank’s trust division had policies that required that they handle investment management for trusts in-house.

 

To make matters worse, the Madisons had not only named the original bank as their trustee – but also as their executor and power of attorney agent. Bank policies and state laws change constantly so alternative plans should always be considered. The result of the bank’s declination to act in the Madison family is far reaching. In next week’s Senior Advocate we will see how a solution is reached to keep Susan safely at home and her trusted money managers at her side.

 

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com

 


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