Revocable Living Trusts

 
Philip Fish, CFP® Vice President, Estate Planning Specialist, Sandy Spring Trust

Join Philip Fish, CFP® and Estate Planning Specialist with Sandy Spring Trust, as he shares his 30 plus years of experience on Estate and Financial Planning Issues. Phil discusses Revocable Living Trusts and how this legal document can help families manage their assets, protect their affairs during an incapacity, settle their estate and establish trusts after their passing to protect loved ones. Phil covers the selection of trustees, preparing family for transitions, the proper titling of assets and other important details focused around Revocable Living Trusts.  

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Transcript

  • Question

    Revocable Living Trusts

    Answer

    - Good morning everyone. And thank you for joining our financial and estate planning discussion. My name is Phil Fish. I'm a Certified Financial Planner and an Estate Planning Specialist with Sandy Spring Trust. You're joining us in one of two ways today. So maybe you've joined the live event so a happy Tuesday morning to you. It looks on your screen like you're the only attendee, which is not the case. We do that for privacy reasons. So your video and your microphones are muted so you can just relax. And many of you are gonna be watching this from a recording of the event. So for you a good morning or good afternoon or good evening, I'm not sure what time of day it is there. Today, hope for the next 45, 50 minutes, I'm gonna do my best to outline for you some important financial and estate planning discussions. We received quite a few questions in advance regarding revocable living trust. I'm gonna lean today's discussion fairly heavily on the revocable living trust side of the fence. And hopefully you'll enjoy today's program. And hopefully if you feel comfortable, you'll share information with others. We're gonna post the recordings of the seminars on our website @sandyspringbank.com. I'm speaking to you today from our boardroom of Sandy Spring Bank founded back in 1868, a small bank created by local farmers after the devastation of the Civil War. And a very proud little item of knowledge is we were one of the few banks in the region that accepted deposits from everyone and we'd grant loans to everyone and anyone. There were no restrictions. And back in the 1860s, many banks had restrictions on who they would do business with. We've grown over the past 152 years to be a large, strong, community-based bank and we're now the largest community-based bank in the greater Washington region with over 1200 employees and branches in DC, Virginia and Maryland. So if you bank with us, I just wanted to say thank you. And if you don't bank with us, I hope you might consider our services at some point. Materials were shared as far as an outline and estate planning flow chart. But to be honest, if you don't have those with you, do not worry. Hopefully you've got a pad of paper, a pen or pencil. And we're not gonna take questions today for a couple of reasons. One, we have a lot of information to share and so our time is kind of limited. But to be honest the real question is in these types of formats, it's very hard to answer the question without having some background knowledge on the person who's asking the question. Two individuals with very similar family structures and assets and ages might have completely different estate and financial planning, goals and objectives. And the answer to the same question asked by those two individuals could be very different. So what I wanna do today is actually have you think about things and I wanna raise questions, raise awareness and hopefully you may take those questions to your estate planning attorney, to your accountant, to your financial advisor. And you're certainly welcome to contact me. The way we do these events is I never contact anyone unless they've asked. So you'll find my contact information throughout the materials on screens at the beginning and at the end. Or you can just call Sandy Spring Bank and asked to be contacted with Phil Fish who works with the trust division. Before we get into the core of our material, I wanna just read to you a disclaimer which is important. So if you'll bear with me for about 20, 30 seconds I'll appreciate that. The material provided today is for educational purposes only. And it's provided by Sandy Spring Trust, division of Sandy Spring Bank. It's not intended to constitute tax or legal or accounting advice or recommendation for any investment strategy or transaction. You should always consult with your tax, legal, accounting or financial advisors regarding your specific situation and needs. Our staff when clients work with us, always do coordinate with other advisors on legal and tax issues. Sandy Spring Trust and the Sandy Spring Bank logo are registered trademarks of Sandy Spring Bank, and all rights are reserved. So that takes care of our kind of disclaimer, which is important. Whenever you attend sessions like this and you're learning information, be careful about applying something you hear or read into your own specific situation until somebody with knowledge has actually maybe given you some feedback. This is complex and there are no simple solutions. There are no quick fixes. So today I'm not gonna be telling you how to do your estate plan, I won't be telling you how to invest assets. What I hope to do is give you an introduction. And for those of you who'd like to speak to me there, I'm a salaried officer of the bank. I've worked for Sandy Spring Trust for the past 20 years. I've been doing this for over 30 years and I've been a certified financial planner for 20 years, and my title is Estate Planning Specialist. I'm not an attorney. I was a trust officer for many years so I hope families navigate through different life stages dealing with working years and retirement and periods of poor health and the death of a loved one and legacy, managing trust established after the death of a loved one. And that's kind of what we do at Sandy Spring Trust. We have a staff of close to 50 professionals, all of them salaried helping clients manage assets under federal fiduciary standards, be named in certain documents as a trustee or as a personal representative and provide support to family members who are named in different legal roles within a client's legal documents. So we're gonna talk a lot today about the issues clients face, how we help individuals. And I hope you enjoy today's program, and I hope you'll share knowledge of this program with others. This is a community event, you do not have to bank with us to view these programs that we'll post on our website. And we do hope that individuals will be able to gain some knowledge. So grab your pad of paper and your pen, relax, and I hope you enjoy today's program. So on the agenda you'll see there's 10 items if you have that with you. If you don't have it do not worry, I'll guide you through it. So we're gonna break today and kind of three segments. We're gonna start with the legal documents with an emphasis on revocable trust today. We'll talk about what documents you should have in place, the selection of decision-makers, preparing your decision-makers for future roles and the titling of assets. Then we'll kind of flip the page on the agenda and talk about investments for a little bit. Managing assets under fiduciary standards, what does that mean? What are the challenges in today's investment environment which are significant with low interest rates and the stock market being well, the stock market? So we'll talk about what it means to manage assets under fiduciary standards, which is what we do at Sandy Spring Trust. We'll talk about the support that's needed to be provided to family members or individuals named within legal documents. And then we're gonna wrap up with a difficult session dealing with incapacity, the loss of a loved one, estates and death unfortunately. And then we'll talk, wrap up with a discussion of trusts established after the loss of a loved one to protect family members. So as you can see, we've got a lot to cover today. So let's get to work. Legal documents. Why do we need them? Well, I'm the youngest of four. My parents have passed on. But if my father were alive and he wanted to kinda take care of his estate planning, and he just grabbed the pad of paper and he started writing down, "I want my sister, sorry my daughter Maggie "to take care of my affairs for medical issues. "I want my son David to take care of my financial affairs "if I get sick and I wanna split my assets "between my four children." And he writes that down on a piece of paper. Unfortunately, it's not really gonna be legally acceptable. We live in a very litigious world and it's a very complicated world. So we have legal documents designed to state clearly a client's wishes. Who do you wanna take care of your affairs when you get sick on a financial basis? Who do you wanna make medical decisions for you if you're unable to communicate clearly with hospitals or doctors? How do you want your assets to be dispersed? Do you wish to have any type of tax plan established to minimize taxes that can sometimes be applied when assets transfer from a client to their family members? And do you wish to establish any type of trust to protect a family member? So these legal documents are really gonna be established to provide control. And that's really what financial and estate planning is about, controlling your wishes, controlling your affairs, controlling your investments. So let's start with the revocable living trust. As I mentioned we received quite a few questions regarding trust. So a revocable living trust is a legal document. It's kind of like a combination of a financial power of attorney and the will, which we'll talk about shortly. but is established during the life of the individual. So we use my father as an example, George Roger Fish. So if he wanted to establish a trust, he would establish the George Roger Fish revocable living trust. Couple of key words there. Revocable, this trust that my father created can be changed, revoked, amended, updated. It's not set in stone, so it creates nice flexibility. It's also a living trust. It means it's created during my father's lifetime. While he is competent and able to create a legal document he would meet with an estate planning attorney. As we mentioned in the disclaimer and as I mentioned throughout today's program, I'm not a lawyer. We do have lawyers who work for Sandy Spring Trust but they can never be your attorney. So we're always going to work with your attorney. We can recommend local attorneys in the region that we've gotten to know over the years. But you need to be working with an estate planning attorney who is familiar with the laws of the state where you are a resident. So some of our clients come into Maryland or DC or Virginia from another location. That's a good time to have documents reviewed. We prefer that you work with an estate planning attorney, somebody who's been doing this for a long time and has a good depth of knowledge. And that's kind of the starting point. So revocable living trust is a legal document. And there are generally five components. We have the grantor sometimes called the settlor, that would be my father. It's the George Roger Fish Trust, he is the grantor sometimes called the settlor, the creator of the trust. So he works with his attorney and he creates this legal document. And within the legal document, he's going to create trustees and the trustees are the people authorized to act on the assets that are held in the trust. Well my father can be a trustee initially. So it could be the George Roger Fish revocable living trust, George Roger Fish trustee. It would use his social security number as a tax identification number. Any dividends or capital gains or income generated on investments held in his revocable trust would flow to his 1040 normal tax return. So really if you place my father's individual account next to his George Roger Fish revocable living trust account with him as the trustee, not a lot of difference. My father controls both assets. He can put money in, take money out, buy and sell securities, transfer funds, close accounts, buy real estate, sell real estate. So it's really just a way of wrapping his assets in a legal document that really comes into play later in life. Because within his revocable living trust, my father is gonna establish successor trustees, alternate bank trustees, backup trustees, trustees who are gonna step in later. And the documents gonna outline when these individuals step in. At Sandy Springs Trust, if somebody came to us and said, "Phil we'd like to hire you "and we'd like you to take care of our affairs during life "and when we got sick and when we die and maybe beyond," that's one of our primary roles. We would be working with a revocable living trust because it clearly states when the trustees step in and how. And that's called kind of the trigger mechanism, the transition from my father being the trustee to somebody else. And then the document is gonna outline how that happens. It might be if he died, if he resigned, if he became incapacitated and it would define what that means in the terms of the trust. It could be his personal physician signing off, two physicians, three physicians, a family member. So how the document is created is very important. And we don't just need to name one backup trustee. So if my father named my sister Maggie, well what if Maggie was unable to serve? So there should be backups to the backup. And this is where things get complicated and this is where clients can really struggle. Who you name in your documents is critical. So we have the governing documents. So we have my father as the grantor, he selects the trustees. The lawyer is creating the actual document that kind of lays out the parameters. And then we have beneficiaries listed within the trust similar to if he had a will and he listed the four children as beneficiaries. In his trust, he could list the four children as beneficiaries. He could list charities, he could create trusts that will continue on after he passes away. So his revocable living trust could continue on. Let's say that one of our family members had a disability, my father wanted to create a trust for that family member. That could be part of the trust kinda in the back pages it would state when I die, take a portion of these assets, place them into this trust and this trust is now described in the following pages. So these documents can get pretty sophisticated. And within it, we can do tax planning. Certain states have state taxes when somebody dies and tries to pass assets on we have a Federalist state tax. It is a lot higher than it used to be. But it still catches some people because it includes all of your assets, your business holdings, your real estate holdings, all of your investments. And so there are some individuals who actually exceed the threshold. So we always wanna keep an eye on taxes. So those are kind of the parameters. We have the grantor, my father, we have him working with an attorney to create the trust. He names trustees himself, and then maybe others. He lists beneficiaries, he has the governing document. And then the last piece of the puzzle are the assets that are placed inside of the trust. And we'll talk about this later on today. One of the common mistakes we see with trusts is the client goes see the attorney, creates the document, this nice structured plan to take care of their affairs during life and sickness and death and beyond. But then they kind of fall short on the critical step of titling the assets properly in the name of the trust. And that's something we spend a lot of time and energy with our clients on, and you should talk to your attorney and you should make sure that your assets if you're using a revocable trust are titled properly. Not all of the assets will flow into the trust. Things like retirement accounts, IRAs are gonna remain outside because they have to remain in the client's individual name. We're fairly early on in the process and as you can tell, it's a lot of information. So for some of you on the call, you're gonna have a stronger background in either financial and estate planning. So I will apologize because some of this information you may feel is very basic, very fundamental. And for somebody with a stronger background, it is. For some of you on the call, you're gonna feel overwhelmed. You're gonna feel like you're trying to learn a foreign language in an hour. And it does feel that way. The terminology trustees and agents and powers of attorney and revocable living trusts and powers of attorney, it's just all this foreign language that you're not familiar with. I've been doing this for over 30 years. For me, this is kind of my world but if my car breaks down, I'm a four year old. I don't know how my car works, I know when it works and when it doesn't work. I don't know how it works or how to fix it. I take it to my trusted mechanic and I go, "It's not working properly. "Help." I don't know how to fix my air conditioning or my electrical systems or my plumbing. We all have our skill sets. So it's okay to be confused but it's not okay to have that confusion prevent you from protecting your family and your assets. And the reason we do these events, the reason that we make them available to anyone and everyone is that everyone on the call should have some form of an estate plan. Maybe it is a revocable living trust, maybe it's just a will or a financial power of attorney but it should be a plan based on their needs and their situation. Should you have a revocable living trust? I have no idea. I don't know enough about you and we would have conversations with an estate planning attorney and for some clients it's a wonderful fit, for some it's really not a good fit. Everyone is different. But if set up properly, a revocable living trust can be a very powerful tool to protect assets managed during life, managed upon an illness, managed upon death, disperse and even manage beyond death. So it can if set up properly be a really nice vehicle. But you don't have a revocable living trust, you have complimentary documents, you would have a will. Now if you're using a revocable living trust, the will is a fairly thinner document. What it says is if I missed anything. So my father would have a will that says if anything's not in the George Roger Fish revocable living trust that should be, when I die just take it and kind of pop it on over to the revocable living trust. So it's kinda like a broom, it cleans up the loose ends. We don't want too many assets going through that process but it's important to have the will. And there are some responsibilities that come with the personal representative who's named in the will to take care of some responsibilities when my father passes away. Normally, the trustee is gonna be the same person or entity as the person named in the will because the two roles are gonna coordinate. So it doesn't really make sense to name different people. It creates more chance of there being some confusion. There will be a financial power of attorney. Now the revocable living trust is gonna manage the trust assets during an illness. But as I mentioned earlier, we have certain assets like IRAs or 401k plans that won't be controlled by the trust. So the trustee won't have access or control during my father's illness on his retirement account, that's where the financial power of attorney comes into play. And the medical advanced directive is another important document because that's medical issues. So the revocable living trust is a financial document. It's not gonna get involved in healthcare issues and end of life situations regarding medical treatment. So if you are using a revocable living trust, you're gonna leave the attorney's office with four documents. A revocable living trust, a will to kind of clean up loose ends, a financial power of attorney to handle financial matters during the life, during an illness that are not controlled by the trust, and a medical advanced directive to deal with medical decision-making. If my father could not communicate to the doctors, the medical advanced directive lists a medical agent, a decision-maker to represent my father and states his wishes as far as end of life medical treatment. That's what we hope to see with clients. Some clients who do not use a revocable living trust will have a will, a financial power of attorney, and a medical advanced directive. Clients who use a revocable living trust will have the trust plus those other three documents. Deep breath. So that's item one. Item two, who do we name as the trustee? And that's probably an area I spend a lot of time talking to clients about. Well you can name a spouse if you are married, a significant other, a partner, certainly somebody close to you. But you need to realize that as you get older, they get older. The other issue is I've been married to my wife Lisa for 26 years. If something happened to her, I would be lost and she would be lost if something happened to me. So support to the spouse is a huge part of what we do at Sandy Spring Trust. Helping the spouse or partner or significant other deal with the illness or loss of a loved one. But you can't just name a spouse, so you need a backup. Brothers and sisters are fine but as you get older, they get older. My sister Maggie is 15 years older than I am. So when I'm 80 she's 95, probably not a good fit. Children, absolutely. You can name children as trustees and in the other roles as well, agents, which are in the powers of attorney, personal representatives in the wills. Sons, daughters, you can certainly name them. You need to look at how busy they are, where they live, how they get along with their siblings. You can name multiple decision-makers, you just have to be careful. Talk to your attorney about that thought. If you name Steve and Suzie, which I'll introduce to you in a few moments who Steve and Suzie are. If you name them together with what's called an and designation, both of them have to sign everything. And a lot of financial institutions do not like accounts that require two signatures. They either refuse to accept it or charge a very heavy fee to monitor that account. You do Suzie or Steve, either one, it can work, but the question is what if they start to disagree? So we have to be careful about who we're naming. Selection of a decision maker, spouses, significant others, brothers, sisters, children. Once you get beyond immediate family and you start looking at nephews, nieces, cousins, friends, you are asking a tremendous amount for this individual to do. This is hard work. It was hard work before the pandemic. It's incredibly more challenging now. And it's why we at Sandy Spring Trust are very busy because we get asked to either support family members to make their role easier or sometimes we get asked to be named as a trustee and Sandy Springs Trust can be named as a trustee within trust. It's one of the core roles that we serve in. So once we decide who we're naming, and I mentioned Steve and Suzie. So Steve and Suzie are hypothetical decision makers, hypothetical trustees. They might be your nephew, your niece, your son, your daughter, a trust officer at the bank, but you never name the individual at the bank, you would name Sandy Spring Bank. And then a bonded insured salaried officer of the trust division would be working with the families on behalf of the bank. But what do we need to do with Steve and Suzie? Item three, we need to communicate with them. If you take nothing from today's discussion, please take this. Talk to the people you've named in your documents. Open up the lines of communication now while you're healthy. They need to know. First of all they need to know that they've been named. I meet clients who haven't told Steve and Suzie they'd kind of kept it a secret. Please don't do that, tell them. You might wanna ask if they wanna serve, and to be honest, if they're smart, they would politely decline because if they know what they're being asked to step into, they might well politely say, "Can you find somebody else?" But they need to know everything. Where are these documents kept? So there's wonderful trust that you've created with your attorney. Where's the original? Because sometimes you need access to the original. What's in the safe deposit box? Sandy Spring Bank, Georgia Avenue, their main office, downstairs, Box 345. Wonderful. Where's the key? Where you have to step into the client's house, go to the archway between the dining room and the living room, head towards the kitchen, go in that direction, step off four pieces, remove a coffee table, remove a throw rug, double tap on the floorboards, lift up the floorboard, reach down, grab a box, inside the box is the key to the safe deposit box. Nice hiding spot. Do Steve and Suzie know about it? Do they have a key to your house, to get into your house to pace off from the archway towards the kitchen to access the key? Do they know where the box is located? And are they a signer on the safe deposit box contract at the bank? Are they authorized? A key alone doesn't work. They have to be authorized to access. And if they don't have authorization, then they have to go through a legal process to get it and it causes delays and frustrations. Where are your assets located? Where do you do your banking or who's your attorney? Who's your accountant? Who's your financial advisor? Who's your insurance person? Do you have insurance? Do you have life insurance? Long-term care insurance? Do you have a stamp collection stuffed under the mattress? Do you have diamonds inside meatloaf and a little zippy bag wrapped in meatloaf, wrapped in foil or stuffed in the freezer with meatloaf written on the outside? Do they know that inside that foil wrapper are $20,000 of diamonds that you've hidden there if they thought it was a really good hiding place? Is the painting on the wall valuable or just a nice print that they put in a really fancy frame? Or is it an $80,000 limited edition? And if it is, they need to know that so they don't sell it in a yard sale for 30 bucks and somebody smiles and go, "Ah, I had a good day at the yard sale today." Passwords. We do a lot of work online. Passwords are just everybody's headache. You've gotta have a capital letter and a squiggly and a number and you've gotta change it. Well, Steve and Suzie are gonna have to access those accounts. Do they know what accounts are password protected and do they know the passwords? Yes. They're going to need to access your information. And if you don't trust them, they shouldn't be named as a trustee or an agent or personal representative, you should find someone else. If you do trust them, you need to share information with them because when you become sick or die that information you have in your head goes away. The fact that you know the passcodes or you have a secret hiding place for the passwords or you have a master password plan, a system, but you need a master password to get into the password system to access the other passwords. Communication with the decision-makers is critical. Item four, titling of assets. The biggest error we see with revocable living trusts is that they do not get titled properly. My father goes to the attorney, he creates the George Roger Fish revocable living trust. It's a beautiful document that lays out his plans, his wishes, it takes care of his affairs during a period of poor health. It disperses his assets when he passes away. It avoids probate, which is one of the nice issues of a trust. Probate is the legal process of assets flowing through the will through the local court system. A trust avoids that probate system. It basically flows the assets through the trust. So if set up properly, it can be a very efficient way for assets to be managed during life and transferred upon death. But you have to title the assets into the name of the trust. Deeds have to be changed, accounts have to be changed. And if that doesn't happen, we can end up with an estate plan that is more messy and the plan to make it efficient fails. So how assets are titled is critical. Beneficiary designations override the trust or the will. Joint ownership of assets. I meet clients sometimes they have trust, but they have a lot of accounts in joint name with children and it's like all those assets are gonna flow directly to the kids. It's gonna override your requests that you've made in your trust. So how your accounts are titled is critical. And with a revocable living trust, it's even more so. If you're going to go down that path of having a revocable trust, you need to accept that you need, and this is a great time to look at your accounts and to get out the broom and to reduce the number of account numbers. You have 20 mutual funds at 20 mutual fund locations with 20 account numbers, and you wanna do a revocable living trust. You're gonna have to contact all of those 20 locations and make the changes. If you create one account in the name of the trust and bring those mutual funds into that one holding account that's titled in the name of the trust, all of a sudden, all of those 20 mutual funds are managed and handled by the trust. Writing information on the back of the trust doesn't work. It's how the accounts are titled. So when we look at a statement, when we look at a deed, that's what we're looking at. That's kind of the first segment. As we flip the page, what we now start to look at is managing assets. It's hard. We have a team of salary professional portfolio managers. One of the reasons I've worked at Sandy Springs Trust for the past 20 years is we are a fiduciary under the federal fiduciary standards. All of our staff are salaried. No products, no commissions, no conflicts of interest, no proprietary funds, no investments that we own and operate, no investment firms where we have a relationship with, where we wanna try and steer clients over here, because we're getting a better kind of return or sharing a fee or any of that. It's transparent with us. It's why we get hired a lot to manage old 401k plans, IRAs, trust assets, individual assets, foundations, church funds, you name it. Our team of portfolio managers do an amazing job of helping clients navigate through the storms. The analogy I use with investing, it's like going out into the ocean and yes, it's dark clouds and rain, and lightning, and high waves, and tides and it's scary out there. Our portfolio managers do not control the weather. They don't control the tides, they don't control the waves, but they can navigate. That's what their role is. To help clients pick the right course to avoid problems, avoid the rocks, to monitor investments closely. And it is difficult times. The low interest rate environment right now is they got punched to investors. You're trying to own a return, and there's nothing out there. CDs, savings accounts. If you lent money to the US government to help with their debt and bought a 10 year government bond, you'd earn well less than 1% per year right now. Money lent to a corporation, a high quality corporation in a corporate bond, a 15 year bond, setting may be 2%. This year my wife and I refinanced our mortgage through Sandy Spring Mortgage. Our rate was 2.75%. Made me kind of feel good that I'm only paying 0.75% more than say Exxon. Felt kind of proud about that. The wonderful thing about these mortgages is that the mortgage company cannot come to me eight years from now when rates are higher and go, "Hey Phil, you got a mortgage in 2020 at 2.75. "Rates are now at six. "We wanna redo the loan. "We wanna rework the mortgage and we want you paying 6%." And I can stand up tall, shoulders back, look him straight in the eye and go, "No. "It's a 15 year loan. "We made an agreement. "I pay the mortgage for 15 years "and my rate is locked in at 2.75%. "Go away." But the reverse is true when we deal with investing. If we buy a bond for 15 years earning 2% and rates rise and now those same corporations are issuing bonds that are paying five, 6%, you're stuck at two. And if you go to Exxon and go, "Hi, I lent you money in 2020 to build a refinery "and it's now 2027 and then rates are higher "and I wanna redo our agreement." "It's a 15 year bond, I want to get my money back." And they go, "No. "You lent us money till 2035, 15 year loan. "We'll pay you your 2% in interest. "And in 2035, we'll give you your money back. "That's how bonds work." And if you try to sell that bond in the open bond market, you're gonna really lose a lot of money because who wants to own a bond that earns 2% when you can buy a similar bond paying 6%? So investing right now is difficult. The stock market is hitting all time highs. The thing with the stock market is we have indices, the S&P 500, Nasdaq, the Russell 1000 and all of those different indices, Dow Jones. The thing with indices is that just a collection of stocks that are tracked. So the S&P 500 is around 500 stocks that they track but it's not an even playing field. It's not 500 stocks where we put a dollar in each stock and track how they do. It's what's called a weighted index. And a lot of the indices are weighted and you really have to be careful. With the S&P 500, over 20% of the returns generated by the S&P 500 are generated by only five of the 500 companies, the big ones. And so you're not really diversifying the way you think. The other problem with indices and ETFs, an Exchange Traded Fund, which is where you buy a basket of investments, is when you unravel the stock market and you look a little deeper, certain sections called the sectors of the stock market are doing really well right now during the pandemic, some are really hurting. Certain companies are doing very well, certain companies are hurting. When you do an index approach, you're investing in all the companies, the good ones and the really bad ones. It's why we use ETFs occasionally kind of to fill in some gaps. But Sandy Spring Trust, we manage assets actively. Clients hire us to navigate, to select investments, to watch them closely and to decide how is this company gonna be three years from now? How are they adjusting to the pandemic? How's their cashflow? How's their savings? How's their debt load? How's the management structure? How's their product line? And that's what professional management under fiduciary standards means. It's why we get hired a lot. Not just to be a trustee, not just to support family members who are named, we get hired to manage assets and we do a really nice job because we have no conflicts of interest to get in the way. We're not leaning you towards a solution because we make money. And the staff you deal with are salaried officers of the bank, governed under that fiduciary standards. So as we move towards the tail end of our discussion today, before I leave the investing side, a very important point because we're talking about revocable living trusts today. My father as the trustee of his revocable trust can do whatever he wants. He could invest all of his money in one stock. He could invest in very aggressive investments, hedging and derivatives, and options, and you name it. He can do whatever he wishes with his funds. But if I become his trustee, if he names me as his successor trustee, the moment that transition occurs, the rules change because those funds in my father's trust are not my assets. They are his, and I'm acting as a fiduciary managing his assets under fiduciary law and I have a responsibility. And the way I approach investing is gonna be different than if my father was managing his own assets. And time and time again, we see clients make the mistake. Individuals who are trustees, either manage assets as if it's their own assets, taking risks that are not appropriate for the trust. Or they say, well dad or mom managed assets this way, so I'm just gonna keep managing it the same way. And that is sometimes the wrong solution. And the trustee can be held liable for their actions. And yes, the trustee can be sued if they make mistakes that are deemed to be violations of their fiduciary duty. So if you know of anyone serving as a fiduciary, as a trustee, they should have professional help under fiduciary guidelines to guide them as to how to manage these assets. And Sandy Springs Trust gets hired a lot by trustees who come to us and say, "I'm the trustee of my father's trust. "I need help to make sure I'm making the right decisions. "I wanna hire Sandy Spring Trust to help me be the trustee." And that's a big part of the work that we do. Home stretch and a difficult home stretch. Incapacity, death of a loved one, managing assets for individuals who are in trouble or who need help. Let's start with incapacity. It is the hardest thing to take care of a loved one during a period of poor health. And this is when people come out and the scams and the identity theft and people stealing checkbooks or account numbers or passwords and trying to access client's accounts. It's one of the reasons that Sandy Springs Trust we're a little old school in that clients have online access, they can view their accounts. We send them statements, but they don't have a cheque book that's tied to the investment account directly. They don't have a credit card or debit card that's tied to the investment account. They don't have the ability to move funds online through a password. We do that as kind of an airlock, an added layer of protection, little old school but the clients or the trustee have to call us directly and then we execute whatever transfers that they wish. Again, a little old school, but we've caught so many problems. We've saved clients so much money just by having that added layer of protection. Because if you hand your passcode to somebody or if they steal it and that system allows you to move money, well then you're at risk. Our clients could in theory give their online viewability passcode and login to somebody and they could see the account but they can't move the funds. So there's that layer of protection. So with decision-making with incapacity, we're trying to protect the client. So the documents that come into play when my father becomes sick, well the trustee as we talked about, he's the trustee, there's a mechanism in the trust that would allow me to become the trustee. Maybe his doctor signs off or my father resigned, so my father passes away, that's later. So with incapacity, it would be one of the incapacity clause that would step in. There's a financial power of attorney to handle non-trust assets. There's the medical advanced directive to handle medical issues. This is so difficult and so challenging to the individual and to the family, but it is so important. A revocable living trust can provide a wonderful incapacity plan to protect clients. I'm gonna take a little sip of water because I've been talking for a while. Stay with me. Incapacity, protecting the client's wellbeing, protecting their affairs. It really takes a coordination of legal issues, tax, financial, just helping the individual across the board. And this is where we talk about what kind of help would Steve and Suzie need as trustees or as agents? And the answer is a lot. If I were named as a decision-maker, if a family named me as a trustee, I'm not a lawyer, so I'm gonna need legal help. I'm not an accountant, I'm gonna need help with taxes because Steve and Susie have to do the tax returns for the client that they're representing in this role as a fiduciary. So you're Steve and Suzies, whoever you've named, they're gonna have to handle your financial affairs, pay your bills, do your taxes, manage real estate, manage businesses if you have it, manage rental properties, manage beach houses and second homes, file insurance claims, everything you do, they're gonna have to do during an incapacity. And that's why we get called on a lot to ease the burden on the shoulders of the Steve and the Suzies. When my father passed away, and if he had had a trust, the assets in his trust would have beneficiary designations and it would avoid probate. And the trustee would execute like the personal representatives in the will, would transfer the assets per the requests that are laid out in my father's trust. Other assets like IRAs might have beneficiary designations. If he had a couple of accounts he missed, they may have to flow through the will and be brought in to the trust and then be released out per the trust agreement. So when we look at estate settlement, there are generally four ways to move assets. Joint ownership, which if you have a trust, you're generally not gonna be using joint ownership because that's gonna mess up the trust. You're gonna have your assets in your trust name. You're generally not gonna use joint ownership much. Beneficiary designations. Again, you won't use beneficiary designations because your trust is gonna have beneficiary designations within the document. You may in certain retirement accounts, IRAs, 401ks, they might have beneficiary designations. You have the trust, which is your primary document for transferring assets and then you have the will that will catch any loose ends. At Sandy Spring Trust, we do a lot of work working with clients, working with their estate planning attorneys, working with our Steves and Suzies, preparing for changes, preparing for those life stages, preparing for retirement, preparing for an illness, managing affairs during an illness, preparing for the loss of a loved one, settling estates. And then the final item for today's discussion, trusts after the death of a loved one. Many clients through the revocable living trust or maybe through their will, create trusts after they've died. And with the revocable living trust, the trust would in many cases be embedded in the revocable living trust. Sometimes clients will have a standalone trust, a trust that's set to one side and the revocable trust may send assets over there. The estate planning attorney will kind of guide as far as how to structure things. Who are we sending up these trusts for? A young beneficiary, maybe a 10-year old, a young adult, maybe a 20-year old. Leaving a large inheritance to a 20-year old probably not the wisest move. Though there are some very mature, stable 20-year olds out there so we've had some clients who have released funds directly to young adults and everything's been fine. But in many cases that does not work well. There are some adults who are 30, 40, and 50 years old who should not receive lump sums for many different reasons. They don't handle funds well, they're easily influenced by others, they have a medical or a physical or mental health condition. They may be receiving benefits and then inheritance would disqualify them from those benefits. They might have an addiction, they might have a mental health concern. Lots of different reasons why a lump sum of money being received by the beneficiary might not be the smart decision. Then you would have a trust that would either continue on from the revocable trust or be created through a will or be a standalone trust that begins upon the death of the client. And you're going to have trustees named in those stages. And that's certainly a role the bank serves in a lot because the client may come to us and say, "I have a son with a disability. "I need somebody to be a trustee "for the rest of my son's life." This will may last for, if we're starting today, and the son is only 25, it could be a trust that is still in place 50 years from now, 60 years from now. That's one of the roles that we serve in that continuity of being a trustee. We've covered a lot. So as a review, revocable living trusts are a solid estate planning document. They really should be drafted by an estate planning attorney who's familiar with the state's laws of where you live. So if you live in Virginia, then the laws are slightly different than if you live in Maryland. We wanna make sure that assets are titled properly. You've selected the right trustees, you've communicated with those trustees so they know where things are located and you provided some level of support for those trustees so they can handle the responsibilities that you're asking of them. We have a plan in place to take care of the client in case of an illness. We've made sure that the assets are titled in the right way so the client's intent is honored when they die. We made sure that everything is aligned and not in conflict with one another. And we've established any trust that the client wishes to establish after they pass away. One trust we see fairly often is a lineal trust designed to protect assets from things like divorce. Unfortunately we have a 50% divorce rate in this country. So many clients wanna leave money to their children and they wanna protect those assets so they continue going downhill, they don't go sideways in a divorce situation. So trust can create lots of control, lots of flexibility, lots of protection. I hope you enjoyed today's program. It's been a lot of information. I hope that I've raised a lot of questions. If you'd like to speak to me for half an hour or an hour, there is no cost to do so. You just have to reach out to me and say, "Phil, I watched your recording, "or I attended your live event, "I'd like to have time to speak to you. "I have some questions." I'm a salaried officer of the bank. This is what I do. I don't manage assets, we have portfolio managers to do that. I don't administer trust because we have trust offices assigned to do that. This is my role, to speak publicly and to be a problem solver and to answer questions. When we speak, will I talk about the bank services? Yes, I will. Are we a good fit? I have no idea. But we get hired a lot to help manage assets, be named in documents and provide support to family members who are named. And it's an honor and a privilege to work for this bank. Dan Schrider, who is our president, he's in this building, down the hall. He talks a lot about the employees and how the employees of Sandy Spring Bank kind of make Sandy Spring Bank who we are. 152 years we've been in existence, standing by the side of our clients through World War I and the pandemic that occurred back then and the Great Depression of the late 20s and 30s and World War II, and the technology bust of 2000, which is when I joined and the mortgage crisis of '08 and '09. And the crisis we've been facing this year. If you bank with us, thank you. If you do not, we hope you might consider us. But when Dan says, it's the employees, I come from a slightly different angle. I work here because of who Sandy Spring Bank is, the decisions they make. The decisions made in this room. During normal times, they meet here, board of directors, senior managers talking about the bank's past and present and future. Now they do Zoom calls and do it virtually like we're doing today. But this is a wonderful bank to work for. And so my 20 years here is really not that unusual. We have many employees who've been here five, 10, 15, 20 30, 40 years because the bank takes good care of us. And it is an honor to work here. So I hope you're safe. If you've recently lost a loved one, I'm so sorry. If you're dealing with the health issues either yourself or of a loved one, I'm so sorry. It's difficult times. If we can help you in any way, let us know. For those of you who'll reach out, I look forward to speaking to you. We'll set up a time, either a phone call or a video conference and we'll turn this one way conversation into a two-way conversation and I'll do my best to answer your questions honestly and directly. On behalf of Sandy Spring Trust, the trust division of Sandy Spring Bank, I wish you well. Please take care of yourself and have a wonderful day.

  • Disclosure

    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 or accounting advice, or a recommendation for any investment strategy or transaction. You should consult your own tax, legal, accounting or financial advisors regarding your specific situation and needs. Our staff will work closely with your advisors to coordinate your overall plan. 

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