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SENIOR ADVOCATE

By Liza Horvath

 

Nuances of trust administration

 

An intimate relationship often exists between clients and their hairstylists. Some speculate that humans are naturally open and trusting of people who “groom them” just as our nearest biological relatives, apes and chimpanzees, form trusting relationships with the apes and chimpanzees that groom them.

 

It is easy to establish a trusting relationship with our stylist because, according to Seth Meyers, Psy.D. (clinical psychologist), aside from the grooming aspect, the illusion of physical “distance” created by seeing your stylist in the mirror behind you rather than sitting face to face is less confrontational than looking directly into the face of a friend or psychotherapist. Because of this perceived distance, you are more likely to share, and maybe overshare, personal information. One stylist was quoted as saying, “I know so much stuff I wish I never did.”

 

Recently sitting in my stylist’s chair, I mentioned a little known aspect of the estate planning and trust world which caused her to get vocal and upset. I have been with this stylist for twenty years and when she responded so adamantly, I decided to share more “subtleties” to see just how much of the underbelly of the estate administration world is either not known or seldom understood by those outside the industry of day to day trust management. By the end of the session, it was clear that some of these facts needed to be shared outside the salon chair.

 

Just to clarify, estate planning is when you retain a lawyer to draw up your will, trust and other legal documents. Trust administration takes place when you are out of the picture—either because you are incapacitated or deceased—and your named trustee steps in to distribute your assets to your heirs. Usually, during your lifetime you are your own trustee, but when you can no longer act, your successor trustee—the one you have named in your trust document—acts for you. My comments on this topic were the initial upsetting surprise to my stylist.

 

Even though you name a friend, trusted advisor, licensed fiduciary or bank as your successor trustee, that person is not obligated to accept that appointment when the time comes. If there is litigation looming (think: contesting heirs) or if your estate has dwindled in value due to end of life expenses, a bank trustee will normally decline the trustee nomination. A named friend may turn out to be ill, live outside the country or have another issue that precludes doing a good job as trustee when the time comes. A named trustee is not obligated to act, so your initial estate planning should name a list of potential trustees with the hope that one will act. Without a named trustee, a court action may be needed.

 

The other interesting detail that escapes most is that trustee fees are always negotiable. Although your professional trustee or bank states, “this is our fee for services,” an heir can always negotiate. Trustee fees must be reasonable and along the lines of what a professional or bank trustee will charge. At this time, that reasonable fee is about 1 to 1.5 percent of the value of your estate. So, if your estate is worth $2 million, your trustee may charge a onetime fee of $20,000 to execute trustee duties.   

 

All the nuances that exist in the trust world are beyond the scope of this column, but remember to keep in touch with your named trustees and make sure they are still onboard to act when it is time. Also, let your heirs know that fees must be reasonable and may be open for negotiation.

 

Conversations with my stylist often help me see things from a new perspective—almost like a good therapist. A recent study by the marketing company, WelcomeMat Services, states that a “typical female client will spend between $800 and $900 a year on cuts, styles and the occasional dye job.” I spend more, but my stylist/therapist is worth every penny.

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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