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  • 14 Sep 2014

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SMART MONEY: Why a bank trust makes sense for some families

Several years ago, my mother (on the advice of her long-time family attorney) put her assets into a court-appointed bank trust. For a fee of 1- to 2-percent a month, the bank paid my mother’s monthly bills, filed and paid her taxes, managed her farm property, kept track of retirement investments and her income. Along with these responsibilities came a monthly statement mailed to my mother as well as to her heirs, my sister and me.

My mother’s rationale for the bank trust was two-fold: At age 93, she no longer could manage her own affairs. Regular bill paying was a challenge. Staying on top of the farm and her retirement stock portfolio was even tougher. In addition, mom was being pressured by my sister who had moved in with her to spend money on projects and purchases that mom was uncomfortable with even though she liked having my sister in the house. The bank trust took the money issue off the table.

Julia Anderson writes Smart Money.It now has been several months since my mother’s death at age 98 after a rich and fulfilling life. Settlement of her estate is also being handled by the bank trust officer. That’s been another plus as my sister sorts out what she wants to do...keep the farm or sell it.

Has third-party professional bank trust management been worth it? For my family, I’d say yes. For many people, a good up-to-date will and durable power of attorney drawn up by your family lawyer may be enough. Who needs a bank trust:

  • When there have been multiple marriages with children and step-children.
  • When you can no longer manage your own affairs.
  • If your heirs can’t work together or if one is physically disabled, morally dysfunctional or suffers from mental illness. In these cases, a bank trust can prevent elder financial abuse and later take care of children after you’re gone.
  • If there are substantial assets that need professional management and distribution.
  • A bank trust may make sense for those without direct heirs or those who want an outside disinterested professional third-party to manage and then settle their affairs. The record-keeping and tax-reporting alone have been a plus for my family.
  • Trust requirements

    To set up a trust (and there are many types) it may be tempting to download a formulaic document from the Internet. Don’t do that, experts say. Every trust is unique in terms of individuals and assets, so it is important to tailor a trust document to those specifics.

    “It doesn’t make sense to go to the Internet to find some wacky form to dispose of everything you’ve worked a lifetime for, just to save money on attorney’s fees,” my mother’s trust banker advised.

    Before signing trust documents, review them with the proposed trustee (the bank or other designated entity or person) so that you, your family, the attorney and trustee all agree on what is intended.

    People, especially beneficiaries, may see a trust as taking away control. However, the grantor (that’s you) has the power to amend or revoke the trust, or fire the trustee. Meanwhile, there are pluses to hiring a trustee who does the job for a living rather than appointing Uncle Louie as trustee.

    Banks and other financial institutions are legally bound to provide competent trust management. Policies and procedures are in place, reports must be prepared. Bank trust departments are audited by outside regulators. Uncle Louie, meanwhile, is not required to do anything.

    If the bank trustee is a jerk, you can call his boss. Professional trust managers have a duty to communicate, to keep an accounting, not to self deal and to be impartial. Meanwhile, barring fraud or embezzlement, courts hold individuals as trustees to a much lower standard. That is not to say that professional trust managers don’t make mistakes. That’s why they are insured, bonded, audited and reviewed.

    Doing your homework

    To find out more about bank trusts and the management fees they charge, contact institutions directly and ask for a fee schedule. Interview several before making a choice.

    Are there downsides to a bank trust? Sure. Don’t expect bank trust managers to be too keen on getting in the middle of a big family fight. Trust managers are not there to set the world on fire or act as an unpaid psychologist. Their job is to manage the assets.

    Final advice: Before looking into the benefits of a managed bank trust, meet with your family estate-planning attorney for guidance. Your attorney should be well-versed in both estate-planning legal strategies and how those options may apply to your family situation and your heirs.


    Julia Anderson is the founder and ongoing contributor to sixtyandsingle.com where she writes for women about money, investing and retirement planning. Send email to: andersonmoneytalk@gmail.com