It’s a common conversation playing out for many families today: “Mom and Dad set up that trust account with the bank years ago. We can’t touch it.” But how true is this statement? Turns out, you might be able to touch that trust, and it’s in your best interest to do so.
When Mom and Dad set up the trust, chances are they were working with a local bank and a trusted family banker who knew them well, and personally understood the family’s goals, dynamics and financial situation. What happened to that local bank? It’s likely been bought and sold a number of times since, and gone is the trusted family banker. Now, that trust sits in a large banking institution where the family has little or no relationship with anyone beyond whoever happens to answer the 800 number.
It may not be an ideal situation, but many families think they have no choice. Perhaps the bank has even gone so far as to tell the family they cannot move the trust, or can only access a limited amount of the funds. Quite simply, that advice may not be accurate.
Unbundling your Trust Services
Changes in trust law and in the personal financial management industry now allow investors to unbundle the trust services that were previously being provided solely by a bank. This means you can appoint an independent trust administrator and independent investment advisor to oversee your account. If you’re like most investors, you have your own trusted financial advisor who isn’t affiliated with your bank, and therefore, can provide independent advice regarding your trust.
Why Unbundle your Trust
There are a variety of benefits an investor can experience when unbundling trust services:
- Shared responsibility between the bank and your advisor creates checks and balances
- Avoids conflicts of interest that may arise with advice provided by a bank alone
- Your advisor may take a more real-world approach to distributions versus what a large bank can do
- Freedom to work with your family’s trusted advisor who handles your entire financial picture
- Generally, no additional fees are associated with unbundling your trust services
How to Unbundle your Trust
As you consider the process of unbundling your trust services, the best place to start is obtaining a copy of your trust document and talking with your family advisor. Depending on how your trust reads, you may be able to appoint a new independent trust administrator, and enter into an agreement among all interested parties to make the change.
Your family’s consideration of this change is now more important than ever because we’re entering a period in which the largest transfer of wealth from one generation to the next will occur as Baby Boomers pass their wealth to their heirs. It’s important that families know what their options are, and don’t feel tied to previous forms of trust management (the bank). Explore the opportunities that now exist, talk with your wealth management advisor, and determine the most appropriate course of action for your family’s needs.