The Myths and Truths of Revocable Living Trusts with Meryl M. Kinard, Esq.

Philip Fish, CFP<sup>®</sup> and Estate Planning Specialist with Sandy Spring Trust

(42:45 mins.) In this Professional Discussion Phil Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust interviews Meryl M. Kinard, attorney with the law firm Birchstone Moore. In this interactive discussion Meryl and Phil provide a broad overview on the popular estate planning tool, the Revocable Living Trust.  They discuss many of the common myths along with valuable truths surrounding this legal documents that can handle your affairs during life, illness and upon your death.

Guest Speaker: Meryl Kinnard, Esq. is an estate planning attorney with the law firm of Birchstone Moore: a boutique law firm offering estate planning, probate and trust administration services to clients in the Washington, D.C. area.

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    The Myths and Truths of Revocable Living Trusts


    This Week’s Discussion:
    The Myths and Truths of Revocable Living Trusts
    Presented by Meryl M. Kinard, Esq. an estate planning attorney with the law firm of Birchstone Moore: a boutique law firm offering estate planning, probate and trust administration services to clients in the Washington, D.C. area. 

    Sandy Spring Trust does not endorse or recommend the services of any person or entity not affiliated with Sandy Spring Bank.  

    The opinions and statements expressed by Meryl M. Kinard, Esq. and Birchstone Moore reflect their own views and do not necessarily represent the views of Sandy Spring Trust. 

    Wealth and Insurance products are not FDIC insured, not guaranteed, and may lose value.

    This material is provided solely for educational purposes by Sandy Spring Trust, a division of Sandy Spring Bank, and is not intended to constitute tax, legal, accounting or healthcare advice, or a recommendation for any investment strategy or transaction. You should consult your own tax, legal, accounting, financial or healthcare advisors regarding your specific situation and needs. Our staff will work closely with your advisors to coordinate your overall plan.  

    Sandy Spring Trust and the SSB logo are registered trademarks of Sandy Spring Bank. © 2021 Sandy Spring Bank. All rights reserved.


    - Hello everyone, and welcome to Sandy Spring Bank's, "Real Life Matters Discussion Series". My name's Phil Fish. I'm a certified financial planner and an estate planning specialist with Sandy Spring Trust, and I'm the host of our Professional Discussion Series as we interview local professionals in the areas of law, tax, finance, and healthcare. Very honored today to be joined by Meryl Kinard, she is an attorney with Birchstone Moore, and she's here on a very interesting topic, which is the myths and truths of revocable living trust. So Meryl, thank you so much for taking time out of your day to spend with us. Can we start with a little background on yourself and the firm that you work for and your profession, and then we'll get into our topic for today?

    - Sure, thanks so much Phil, and I'm honor to be here today. As you said, I am Meryl Kinard, I am counsel at Birchstone Moore, which is an estate planning and administration firm here in Washington, DC. I have been at Birchstone Moore for four years, and prior to that, worked at Covington & Burling and their trust and estates group, and do all planning for clients both during life to help them plan and also to help their families administer their estates upon their deaths.

    - Wonderful. And today's topic's an interesting one, because there are so many myths and truths flying around on revocable living trusts, you and I get asked these questions all day long, and so much confusion there. So why don't we start with, can you give the audience just a real brief synopsis of what a revocable living trust is, and then we'll get into some of the myths and truths of misunderstandings and all that fun stuff?

    - Absolutely, yes, so it's so interesting when you hear the questions that clients ask you. As professionals, right, we know the ins and outs of revocable living trusts and what they mean, but when you hear the questions from the clients, you realized just how many myths there are out there. So as a high level overview, a revocable living trust is a agreement really, that a grantor, someone who creates a trust, set's up during his or her lifetime. And revocable means that the person who creates the trust can revoke it, change it, amend it, or alter it at any time during their life while they still have capacity, and prior to their death.

    - Okay, so a lot of people think it's a little bit like a will, and it is a little bit like a will, so it can take care of some affairs when someone dies and directs assets, but it can also help clients during a period of health issues as well, which is nice, and also continue on afterwards and deal with some family issues, dealing with, you know, young family members or individuals with health issues. So we use it a lot in our trust division and you use it a lot in your field because it can handle a lot of different issues, but it does have some complexity to it. So I think the first myth you mentioned was that all trusts are the same, which is again, people say, well, what's this, you know, there was so many different terms thrown out, irrevocable trust and revocable trust. So let's start with that one, you know, about the, you say it's a truth that there are different trusts out there.

    - Absolutely, yeah, I think we see it a lot. I've noticed more increased coverage in the media recently regarding trusts, interest from the public about, you know, what these trusts are being used for and who is using them? So at a core level, there might be some misconceptions just from what people read online or hear on the radio, and what we're focused on today is talking about that revocable trust, as you mentioned, which frequently we're using, we're thinking about for clients as they plan for their estate, whether that's, you know, during their life to help manage their assets or after they pass away, those assets that are in the revocable trust and what happens after their death. Because the myth is that all trusts are the same, right? And so some of those other trusts are irrevocable trust and trusts that once they're created and established cannot be changed. And I think common acronyms that people here for those types of irrevocable trusts are, you know, a SLAT, a Spousal Lifetime Access Trust, or a GRAT, a Grantor Retained Annuity Trust, you know, the estate planning field loves to throw out acronyms on everything.

    - Yes.

    - And so all of those trusts, we could spend another, you know, hour on each of those, independently, but those are really off the table for our purposes today.

    - And I think a common initial kickback that we'll get a lot of times, people will say, I don't want to trust 'cause it's too set, it's locked in, I don't have control. And a revocable living trust is very much like a will, you create it while you're alive, but you're free to change it, it has flexibility, you can update it, you can revoke it completely, you can restate your wishes. So it has great flexibility, but it can be, if used in the right way, a very nice tool to manage assets, manage your affairs during different stages of life. And so, you know, hopefully through today we can appease some fears that, you know, you're not giving up control of your assets. The revocable living trust is your money, we use your social security number, you pay taxes on the 1040, you can access the money at any time, there's no loss of control while the trust is in its, you know, living stage, and just like a will, when somebody dies, then the wishes do get kind of locked in, which is what you want, you know, when you get sick or die, what you have laid out is kind of set at that point, just like a will is when you die, so.

    - Absolutely, yes. We'll dissolve that myth that it's not something, you know, people hear the word trust and they think that sounds scary, that sounds like too much, I don't need that, right, so we'll try to dispel that today.

    - Good. So number two, truth, it is a will add on, not necessarily a substitute, but other estate planning documents are still necessary. So if a client meets with you and they create a revocable living trust, that's part of their estate plan, but they are going to leave your office with some other documents. So we talk about those in other sessions, but let's just quickly, you know, fill out the, you know, the complete estate planning package that many clients will leave your office with.

    - Absolutely, and thinking about this topic, I thought it's so often that a revocable trust is sort of marketed or talked about, even when I talk about it, as a will substitute. And it is in fact a will substitute because it will govern what happens to a client's assets at their death. However, they still do need a separate will that ties in with that revocable trust. And so really the revocable trust goes along with still a will, because what many clients don't understand is that every vocable trust, as you mentioned, can do a lot of things. It can function for a client while they're alive, and it controls what happens when they become incapacitated, or upon their death, but it doesn't cover everything. And so that's why we still need those other estate planning documents. And what that will does as an add-on with the revocable trust is to say that if there are any assets that a client has at their death that are not titled in the name of their revocable trust or otherwise designated to the revocable trust, that will will say, I give all of those assets after going through a probate process, to the revocable trust to be administered, pursuant to those terms.

    - So they're kind of working in complimenting each other, and many times we'll see the same individual or entity named as the trustee upon death of the trust and the personal representative in the will, because they're going to have to coordinate, 'cause there are some duties that are handled by the trustee and some duties that are handled by the personal representative. So if they're not coordinating and communicating well, it can create a little mess along the way.

    - Absolutely, yeah, we usually do keep them coordinated, and you know, not to let that be an overbearing point or a disadvantage of revocable trust, because really the hard core decisions that clients often face in terms of who to name as a trustee or a personal representative, or what happens to those assets when they pass away, all of those decisions are really being made at the revocable trust level and they're just coordinated with the will. So it's not as if you have to do, you know, a full will and a full revocable trust.

    - Yeah, one of my roles within our trust division is there are some individuals, sometimes we're hired to help family members who are named in these roles down the line, and sometimes individuals don't have someone they're comfortable naming, or they don't wish to burden a family member. So the bank gets named as the trustee and as the personal representative. We don't get named in the complementary roles under the powers of attorney, but we're doing the heavy lifting, we're paying the bills, managing the assets. And then there are some other documents for a lifetime issues like the financial powers of attorney and the medical advanced directives, which again, are going to complement the trust during the lifetime of the client, just like the will will compliment the trust upon the death of the client. And so that kind of wraps out that, you know, estate planning, you know, suite, which is, you know, the trust is the core, the will to compliment the trust upon death, and then the powers of attorney to handle some non-trust assets, 'cause I think one of the things you and I talked about is not all of the assets the client has is going to go into the trust.

    - Right.

    - So let's talk about that brief way, 'cause that's important to realize.

    - Absolutely, I think that is a myth to dispel and one that often I get questions on and trips up a client. So we'll go through the estate planning process and pretty much I would say 99% of our clients we're recommending and creating revocable trusts for them. And so they'll say at the end of it, well, what is in my revocable trust? And sometimes I say nothing, and they say, what, why did I do this? And there is a purpose, so as you mentioned, the financial power of attorney will cover those assets that are not retitled into the revocable trust. And oftentimes those assets are our client's retirement accounts, right? So retirement accounts always just have to be held in a person's individual name, they can not be owned by a trust, we can designate a trust as the beneficiary upon their death, but during their life, while that participant is alive, it remains in their individual name, and that's a common one. Another common one is for married clients who hold their assets jointly. Unless there is a reason to separate assets, we like having particularly their primary residence, married couples can hold that as tenants by the entirety, that gives them great creditor protection, and so oftentimes we'll just leave that titled in their joint names. And the benefit of keeping those joint assets and not retitling them into their separate revocable trusts is, but still creating the revocable trust is if something happens to one of them, we can quickly retitle assets into the survivors revocable trust, or if we need to split it for any purpose, we'll have that already there and ready to be funded. And so, you know, it's a really powerful tool in that way to just even have, if we're not going to take the time to sort of fully fund it.

    - I think that's a very important part is one thing we stress when we guide clients is we say, you really should work with an estate planning attorney who's going to be knowledgeable in the state that you reside in because documents are different in different states, but also can offer some personalization, because every client is different, and they have different assets, and different personalities. Some clients that we meet with, you know, like keeping things in joint name, you know, for a while, some, you know, because of their family structure, are more comfortable splitting the assets earlier on. It might be a blended family where you have, you know, a second marriage, so you might have a more unique situation there. But I think the nice thing about trust is if, you know, like anything else, it's a tools, so the question is who's managing the tool, who's working the tool? Is it a skilled craftsman, like the individuals, you know, at your firm who can tailor the client's assets and situation and say, okay, you know, here's the starting, kind of the clay, that is the starting point, now let's kind of work it for your family and the trust and the estate plan the client leaves with might be completely different than the client you met with last week because their assets are different, or their personalities are different, or the needs are different. And I think that's one thing I see is some of these cookie cutter estate planning solutions, you know, online or through different places, you know, they're okay, but they lack that personalization that's so important with estate planning.

    - Absolutely. We spend a lot of time getting to know clients assets and the way they're titled, and why they're titled that way. You know, sometimes that may be they received an inheritance or a gift from somebody, or you know, they have to comply with a premarital agreement or something like that. And so we always want to make sure that we're working with our clients in a way that they can understand how the revocable trust is going to work for them. And sometimes that's breaking it down in a visual, right? So for clients to understand that a revocable trust, you mentioned it earlier, and I know we can get into this as another myth, right? It's still in the full control of the person who created it, so it's almost as if taking, you know, if you have $5 in your pocket, five $1 bills, you know, you're taking one or two of those dollars and you're moving it into the other pocket and you've just, you know, titled that the revocable trust pocket. And so it's important to understand when we're moving assets around, where are they coming from and why were they titled that way?

    - Yeah, and when I speak on estate planning generally, a very common theme is the importance of titling of assets in a way that is in harmony with the estate plan that's in place. So many times we meet clients and they have a very nice estate plan, it might be a revocable living trust, but the way their assets are titled creates disharmony and conflict and can cause a lot of disruption if the two don't work together. So it's very important that, you know, when clients are working on the revocable living trust, a myth that we work with and talk about is having the document does not mean the trust is funded, many times saying, hey, I got this trust, so all my assets are in the trust, right? No, it's based on your account titling, and deeds, and there's another step, and many clients miss that step, and it can really, you know, create a lot of mess later on that shouldn't have been there, unfortunately.

    - Yeah, absolutely, I think that's a great point and one that as clients are considering the revocable trust that they really do understand that. And when they're working with an estate planner, or with you, or another another person to help them with their estate plan, that they're asking the questions of how does this all fit in to, you know, my whole world of assets? How does this document sort of overlay into that?

    - Yeah. I know another common misconception is taxes. People get, you know, they're like, oh, I need a revocable living trust because it's going to solve all my tax problems. Well, you can do tax planning inside of the trust to help with things like estate taxes and other issues, but as of itself, just in its raw form, it doesn't really help with taxes. You have to do a little bit of work internally to get that assistance, is that correct?

    - Absolutely, that is definitely a myth, and one I think that is being also driven by, you know, stuff that is being discussed in the media right now, both, you know, radio, newspaper, TV. You can use an irrevocable trust, like we talked about, you know, the different types of trusts at the beginning, if you want to do some tax planning during your life, and whether that's even some income tax planning, there are some trusts that you can use that can sort of help mitigate, you know, income taxes, but those are irrevocable types of trust. The revocable living types of trusts are by their nature what's called a grantor trust, and what that means is that it's always going to be taxed to the individual person who created the trust. And the reason is, is because they have that unfettered control to change it, to revoke it, to do with it whatever they want, and once assets are funded into that trust, you know, there are no gift tax implications or anything like that. So it's always going to just be picked up to the individual persons income taxes while they are alive. And to your point about at death, how can we get that estate tax mitigation by using a revocable trust? And really you can do that planning under a will too, so I don't want clients to be discouraged to think, well, if I want to mitigate some of the state taxes, I have to use revocable trusts. We can use a will or a revocable trust, and we can structure those assets to pass at death in such a way as to help minimize estate taxes or to take advantage of certain exemptions that exist.

    - And I think that is a big myth, a lot of clients equate trusts with very, very wealthy people and estate taxes, and so they say, well, I don't need a trust because I only have a net worth of 800,000, or a million, or 2 million, or 3 million, and unfortunately those people think they're very poor and they're not, a million dollars is a lot of money and they've worked very hard to build it. But revocable living trust, really, I think that power comes in the ability to handle affairs during an illness, and efficiently transfer assets upon death, and create a very smooth transition, excuse me, from the client having a health issue to their decision-makers name, that the trustees that they name, who can step in quickly and easily to take care of the client's affairs and, you know, dealing with assets in multiple states and other areas where, you know, the trust can really come into its own and provide a wonderful benefit for somebody who does not have an estate tax problem, but it does not mean that they revocable trust would not be a great fit for them. So I think that is a very important myth that we need to state is not in cases. This is not just for federal estate tax, taxable scenarios of 10, 20 million, it's for a lot of people can benefit from having a trust of this kind.

    - Absolutely. I mean, you hit on so many sort of core reasons to have a revocable trust. I mean, I have one and I can assure you that I'm not worth millions of dollars. And you know, why is that? I mean, I'm an estate planning attorney, so I guess that puts me at a higher likelihood of having one, right? But I have a minor son and I live in Virginia. And in Virginia, if you create trusts for your, you know, minor children or anyone, really, the Virginia probate court, through the will, can have sort of continuing jurisdiction and reporting requirements for those trusts that are created under wills. And so creating that revocable trust gives me some comfort that if I pass away, you know, the trust that I'm setting up for my son is going to sort of be outside of the court purview, to the extent that that's appropriate. You know, if there is a time where it needs to be, then it can go back into the court's purview, but for the time being, it'll be out.

    - And I think just in our local area, Maryland, DC, Virginia, they have different rules, different ways of handling things, and again, that's where there, you know, if you're a Virginia resident, you really should be dealing with an estate planning attorney who's very familiar with Virginia law, and you know, with Maryland and DC, because they do have the nuances where a skilled advisor could say, oh, you have this type of asset and you're in Virginia, we need to be thinking about this. And that kind of guidance is not going to be obtained if you're not getting the good counsel that people really need, so.

    - Absolutely, yeah, even if you're in Maryland, the difference between the counties can be so drastic.

    - Oh wow, okay.

    - Yeah, it's really having that local knowledge and insight, and practical application is huge.

    - Okay. So revocable trust can save? We've covered that, truth. You have to fund your revocable trust to reap the full benefits? So we've talked about the importance of funding. So many times I'll meet with clients and they bring in the big thick document and they say, here's my trust. And I start looking at their account statements and it's in joint name, individual name, there's beneficiary designations, which, you know, completely override any estate plan. And I think that's one of the challenges that I see is people will use transfer on death and payable on death designations, just fling them around all over the place and not really realizing it can cause a lot of issues later on and it overrides the client's will or trust. So we have to be very careful with beneficiary designations, joint ownership, trusts, assets in sole name, there's no right or wrongs, but has to coordinate, it's so important that everything has to kind of fit together,

    - Absolutely.

    - and it's going to change over time. So many times we meet with clients who have a document drafted in 1994 and that's, you know, nearly, good grief, what's that? 30 from now, did I get old?

    - Yeah, a long time right now.

    - I realized just how old I am, okay. And it might have tax planning doc, we see this a lot. They might have an old document that deals with the tax law when the tax laws were like 600,000 or a million dollars for federal estate taxes. And it does things based on those laws that now are no longer necessary, and that could cause a lot of headaches.

    - Absolutely.

    - So you're like, well, why is this being done? It's like, well, the documents 20 years old, and it's doing what it was told to do 20 years ago, but nobody took the time to update it. So these documents do need to be reviewed every three to five years just to make sure they're still aligned with the family, and tax laws, and things like that.

    - Absolutely, yeah, I mean, even there's so much, I feel, like trust law that has been fleshed out in recent years as the uniform trust code has been adopted, you know, across jurisdictions and our local jurisdictions. And so much of that sort of, even like practical use of revocable trust has increased as those laws have sort of come into play, and it's always just good to update for that, you know, in terms of, I think one of the myths I mentioned as we were preparing for this was, you know, that what you put in the trust always controls. And there are actually some default state rules that actually can override even what someone would put into a trust. And so, for example, I think is really interesting, and this comes up a lot with my clients is there's these default mandatory rules under most states, and this applies in DC and Maryland here, Virginia has an ability to opt out of it, but have mandatory notice of a revocable trust that becomes irrevocable upon the grantor's death. And that's something that you can't override in the document in DC and Maryland without, there are some nuances to that, you know, you can do it under a certain age and that sort of thing. But those are the kinds of considerations that I think are really left out a lot of these old documents. And for some clients, they feel very strongly that if something happened to them tomorrow, they're not ready for their children to know about, you know, the assets that are going to pass to them through this revocable trust, and they want some sort of protection over, you know, how can we plan in the trust itself to build in those protections for their beneficiaries?

    - Yeah, 'cause that has been a lot of changes in recent years about, you know, trustee's responsibilities to notify beneficiaries, and it's why, you know, we and your firm get hired a lot by individual trustees who, you know, it might be a son, or a daughter, or a family member, and the individual becomes sick or dies, and then the role of trustee gets handed over to these people and they're like, okay, I'm now responsible for managing this trust with all these rules and tax laws, and so many times they'll come do a firm like you or an organization like us, and they'll say, help? And many times it's a coordination, 'cause we're a little more heavy on the investment side, you're a little more heavy on the legal side. So it's sometimes tax, law, finance all working together to help an individual trustee navigate and make sure that they don't mess up, make sure they don't trip over or do something they shouldn't do, or not do something they should do. And so anytime I cross paths with a trustee my first question is, are you getting good advice?

    - Right.

    - You know, legal advice, tax advice, financial advice, because you're legally responsible and we want to make sure that you're doing your job properly.

    - Yeah, and it's so important. And I think, you know, we live in an area where, you know, our clients, the people that we're interacting with on a day-to-day basis are sophisticated, professionals, educated, and that's wonderful, but so many times they will, you know, Google and have a.

    - How to be a trustee.

    - Yeah, exactly, and they might be missing the local nuance or, you know, they're just reading a bad article. I mean, I had a client one time who said, well, you know, he was a professor and he talked to one of his professors, and they read the document, and they thought that what it said meant this, and so they distributed the assets based on their interpretation. And as it turned out, it was the wrong interpretation. And so we helped him clean that up and it worked out.

    - Good.

    - But, you know, it's hard when the legalese of these documents can really trip you up, so always good to ask for help.

    - Yes. A good truth I saw on your list that you shared with me was probate, avoidance, and privacy, which is I think if the trust is funded properly, which I think is a very important little side note, it goes back to what we talked about earlier is, the trust, you know, I'll talk to clients say, you know, the trust is like a short line at the Department of Motor Vehicles, and if everything's set up properly, it really can be a wonderful quick, you know, glide through. But if your assets aren't set up properly, you're gonna be sent back to the back of the long line, because you're going to have to go through probate anyway to kind of get you back into the short line.

    - Yeah.

    - So titling becomes important, but if set up properly, a trust can really be a very nice, efficient way to transfer assets upon death, either directly to beneficiaries or into trust that will continue on. So let's talk about that a little bit, 'cause I know in some jurisdictions, especially places like DC and Virginia, probate can a little tricky at times?

    - Yeah, that's a great analogy, by the way, I love the short line, long line, right?

    - But it only works if all your papers are set up properly. The person at the counter is going to look, go, nope, see that big, long line? You got to go back there 'cause you didn't title these things in the right way. And they're like, oh, I was so close.

    - Yeah.

    - 'Cause you know, having the trust itself doesn't get you through the short line, it gets you to have a conversation with someone, so.

    - It's so true, yes. And definitely privacy and probate avoidance are huge sellers for revocable trusts, and ones that people can really understand and get behind, for a variety of reasons. It doesn't even just have to be, you know, to your point about, you know, the probate, avoidance, and privacy. What we tell clients is, if you have to file your will, upon your death, right, that becomes public record. And so anyone can go online or go down to the courthouse and order a copy of it, and not only can they see the terms of your will, but then oftentimes assets have to be reported, and so there's a very detailed listing of the assets, and the beneficiaries, and unfortunately, there's just also a lot of people that like to try to benefit from that, right? So you start getting a lot of calls from, you know, people who want to buy the house and, you know, sell you something in that way. And so then, you know, their personal representatives, their fiduciaries information it's just sort of out there in the public knowledge. And for some people they say, you know, I don't have a lot of money, but I have a weird family situation and I just don't want, you know, my brother that I'm leaving out to have bad feelings about being cut out or, you know, whatever it is, it could also just be like an interesting family dynamic that makes them feel more private and not want to have all of their whole life just sort of out there in the public record forever, right? Like sometimes we have to pull copies of wills, and inventories, and accountings for clients who died, I've done one, I think from 1974 recently in DC. And, you know, it's there forever.

    - Yeah, it might be a family situation where a family member has an addiction or a health issue, and we're addressing that within the document, giving directions to the trustee and guidelines, and if it's a trust created through the will, which you can do, through your will you can establish a trust for a family member, but then that will and the trust that's attached to it becomes public record, where the revocable trust, it's kind of creating your own little private family courthouse where you say, okay, we're kind of over here, and we're going to kind of, you know, direct the assets, and the court system is worried about assets flowing through individual name and, you know, going through the will, and that's their jurisdiction. So if you go through the trust, they're like, oh, that's going through the trust, that's over there, we're okay, we don't have to be as concerned.

    - Absolutely.

    - Okay.

    - And I hear a lot about, there's a lot of fear about probate and there's a lot of misinformation just about probate and itself, like, is it bad, is it not bad? And you really hear both sides. We do administration here, and I'm sure you deal with it a lot in your role as well, specifically in the local jurisdictions, you know, COVID has made it significantly more challenging, right? It's been access to the courts have been cut off, they've been really backed up, I mean, I had a client who waited, you know, she was a surviving spouse and all of the assets were titled in her husband's name, and we had to wait like seven months just to get her letters of administration because it was, you know, it was January

    - Yeah.

    - and the courts were just really backed up. So it's sort of unfortunate. So that is, you know, a benefit. I mean, it can, it doesn't have to be that bad, but I think for every sort of like good story where it went fast and it wasn't that painful, you know, I have probably two more that were, you know, there was some unanticipated issue or it just took a lot longer than expected. So we do like to try to avoid it whenever possible.

    - Yeah, and I think that leads to a really good myth is that revocable trust avoid all administration upon the death of the grantor or the client, which is not true, there is work to be done, houses have to be appraised and sold, and assets need to be distributed, tax filings need to be made. And again, what we stress to clients is the more accounts you have, the more challenges you'll face, whether it's going through a will or a trust, you know, try and reduce the number of moving parts, try and clean up loose ends, 'cause a $300 account takes the same amount of work to deal with as a $300,000 account, you still have to go through the same processes and procedures. So try and clean up those loose ends, you know, maybe have, you know, two IRA accounts rather than six, you know, three brokerage accounts rather than nine. And those things like, you know, book entry stocks, you know, through computer share or transfer agents can be very challenging. But there is going to be administration through a trust when somebody passes away and things that the trustee, who's now designated, is going to need to be aware of and they're going to need to do.

    - Absolutely, yeah. And you know, almost, I think we need to be on heightened alert that that is a truth of a revocable trust, right? Because sometimes people think I don't have to do anything 'cause I don't have to go through this formal process. And, you know, we want to make sure that we know the world of assets so that something is not slipping through the cracks, and so that the, you know, one of the benefits upon death is that your assets receive a step up in basis to the fair market value as of someone's date of death. Well, we need to know what those assets are and to make sure that we're accounting for them, and figuring out what that value is, to your point about getting appraisals and knowing if you have a tax filing.

    - Yeah, I've had a couple of cases in the past month or so where I've talked to clients, and it might've been a couple and the spouse passed away, and I asked, did you get the house appraised when the first spouse died? And I just got a blank look. And if that house gets sold, there are definite tax benefits to that first appraisal because it can increase the cost basis, which is used to calculate capital gains taxes and therefore reduce the capital gain that they might be exposed to if they sell the house later. So, you know, from a tax standpoint there are certain things for larger estates that need to be done to help manage the federal and state estate taxes, even though there might not be a tax owed, sometimes there are things that need to be done and forms that need to be filled to kind of, you know, make sure everything fits nicely with the IRS and the state, say, hey, we did what we're supposed to do, we're playing by the rules and, you know, checking the boxes, and it can be, you know, a very important game to play because the tax consequence of not doing things properly can be huge. So, you know, we stress to clients, even when you have a trust, when somebody passes away, if it's a joint trust, or separate trusts, or, you know when there's a death, there might be tax and legal issues that need to be addressed and get that good advice, you know, from legal counsel or from somebody you trust who's knowledgeable about these issues, because a normal accountant might not be knowledgeable about some of these estate and trust tax issues. A normal attorney who doesn't do a lot of work in this area might not be knowledgeable about those issues.

    - Absolutely, yeah. Those are all great points.

    - So are there any other items, 'cause we've covered a lot, but are there any of the myths and truths that you shared with me that we didn't go over that you'd really say, we really wanted to talk about that before we wrap up? I think we covered a lot.

    - Yeah, I think we did. Oh, one thing that we didn't talk about,

    - Yes?

    - this is also a really common question is, does this creating a revocable trust protect my assets from my creditors?

    - Oh, good question. Yeah, I get asked that all the time. The answer is.

    - No. Going back to that same control piece, right? So clients are always concerned, I don't want to give up control, so you can not worry, you can set up a revocable trust and not lose control, but not losing control means you're on the hook, and you're on the hook for the taxes, you're on the hook for any creditors that come. So there are other types of irrevocable trusts that you can use to help mitigate some of the creditor risk, but you will be on the hook for your creditors with your revocable trust.

    - Yeah, we get asked that sometimes for Medicaid planning, for nursing home expenses, and if the answer is no, a revocable trust is your assets, it's under your control, so they're going to view it as part of your part. If you want to stop planning for things like that, asset protections, talk to an estate planning attorney, and you're going to need to transfer assets out of your name, and there are pros and cons to that, and like with everything. And that's the thing is, you know, estate planning, tax, finance, it's complicated, but for people like you, and I, and others, people that work at your firm, people that work at Sandy Springs Trust, it's not as complicated because it's what we do every day. It's like taking a car to the mechanic and it doesn't work and they fix it. And to them, it's just another day at work fixing cars. And for us, the thing doesn't work, it's pipes, and wires, and electronics, but to them, it's just another day at the office. So getting good advice is so important. So Meryl, thank you so much, this was a great session, some wonderful information. Before we wrap up today, are there any final words you'd like to share with the audience?

    - Just thanks so much, Phil, for taking the time to have me and discuss this topic. And I encourage all, you know, everyone watching this video to learn more, and be curious, and talk to your advisors, and see what works best for you.

    - Wonderful. At the end of today's program there is a slide, an exit screen that will provide Meryl's contact information, phone, email, a website. If you have any questions, reach out to her. And Meryl, thank you so much for your time today.

    - Thank you so much, Phil.

    - And audience, thank you for joining us. My name is Phil Fish with Sandy Spring Trust. I'm the host of the Professional Discussion Series that we host on Sandy Spring Bank's website. It is open to the community, you don't have to bank with us. And if you noticed, when you clicked on today's program, we did not even ask for your name. And we do that in the Discussion Series just to provide a very open format. I'm also the host of a seminar library where I talk a little more at length about these and other topics. And for those sessions, we do ask for your name and how you heard about the event, but no one will contact you unless you ask us to do so. I've been with the bank now for 21 years, I work for our trust division. We manage assets professionally on behalf of clients, we serve as trustee within trust, managing trust assets, we provide support to family members who are named in trust documents. So if you have any questions about trusts, or finance, or estate planning, feel free to reach out to me. My telephone number is 410-785-4112. My email address is listed at the end of today's program, and there's a contact Phil button on the website, happy to chat with you. I'm a salaried officer of the bank and we can maybe get you pointed in the right direction. It's been a difficult couple of years with, as we've talked about, COVID and other issues, so I hope you're safe and I hope you enjoy today's program. On behalf of Sandy Spring Bank, please take care and have a wonderful rest of your day.

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