Individual or corporate trustee: Five things to consider before committing

John_SolomonJohn SolomonExecutive Vice President, Wealth Advisory

When establishing a trust, many people name a family member or friend to serve as trustee instead of appointing a corporate trustee to save the trust money. While it is an honor to be so named, this is a leadership position that plays a powerful role in managing a family’s wealth. Understanding that saving money is significant, it is important to fully explore both corporate and individual trustees to determine the most appropriate option for the trust.

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Individual trustees often have broad powers, a good deal of responsibility, and, in turn, accountability. Trustees must interpret and follow the terms of the trust agreement, oversee the asset management of the funds held in trust, make distributions from the assets, keep records, and do the necessary tax reporting. Here are five things the job description might not tell you, but are important to know:

  1. Fiduciary first. Trustees have what is called a fiduciary responsibility. What that means is that as trustee, you are legally bound to fulfill your duty of putting the benefactor’s welfare first when carrying out the settlor’s (the person who created the trust) wishes. In carrying out your duties, individuals must work to remain impartial and not let emotions cloud any judgment. In instances where this becomes too difficult a task, a corporate trustee may be the right choice.
  2. Managing the bottom line. One of a trustee’s key responsibilities is to manage the assets in the trust. This duty requires ongoing portfolio monitoring and responding to market conditions to ensure that the trust assets are managed in accordance with its investment objectives. Investment allocation decisions must be made in light of the changing needs of the beneficiaries, and the asset managers require ongoing oversight. A corporate trustee can assist by representing the collective interests of investors and ensure the company offering the investment complies with the trust deed.
  3. Mistakes can be costly. A beneficiary could challenge any and all of a trustee’s decisions, from the allocation decisions made, to the investment losses the trust incurs. Many trust agreements have language that attempts to protect the trustee from liability except for cases of gross negligence or willful misconduct. A corporate trustee administers trusts under the supervision of bank regulators. While individual trustees are expected to fulfill the same duties, they are not generally subject to regulatory scrutiny or accountable to regulators to the same degree.
  4. You may need help. Due to the complexities and requirements of trusts, often individuals must hire outside professionals, such as Trust Companies, to assist in carrying out the trust terms. Professional trustees can be added at any time to serve as co-trustee along with you. Combining the services of a corporate trustee with the personal connection of an individual trustee can help to provide peace of mind. In this situation, the responsibilities of each of the co-trustees should be clearly outlined in the trust document.
  5. It’s not entirely thankless. You are entitled to compensation. Typically, trustees are given a trustee fee in connection with the performance of their duties. The fee arrangement varies depending upon the state fee schedules for trustees and the terms of the trust. Professional corporate trustees typically charge approximately one percent of the total net worth of the estate. While this expense initially may appear greater than those of an individual trustee, the individual trustee may need to utilize the services of an investment manager, tax accountant and other professionals to fulfill trustee duties, which could add to overall expenses.

By enlisting the services of a corporate trustee, the trust would benefit from the continuity, prudence and expertise that a professional organization can provide. A corporate trustee brings experience in trusts and investments, accounting, record keeping and trust laws that an individual may not possess. In addition, a corporate trustee offers unbiased decision making that may be difficult for an individual trustee that has been appointed by the family.

To help decide which corporate trustee is appropriate, you may consider engaging in some of the services that are offered through investment management firms that have relationships with a wide array of organizations. Brinker Capital Wealth Advisory works with business owners, individual investors and institutions with assets of at least $2 million and has partnerships with firms that can assist with corporate trusts.

To learn more about Brinker Capital, a 30 year old firm following a disciplined, multi-asset class approach to building portfolios, and an overview of the services available through Wealth Advisory, click here.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

Providing care without sacrificing goals

John_SolomonJohn SolomonExecutive Vice President, Wealth Advisory

In what should be peak earning years, many employees of American business owners encounter family situations that make it difficult to save for retirement at planned levels. As parents and grandparents live longer and medical and long-term care expenses continue to rise, millions of Americans are providing care to ensure elderly loved ones can remain at home.

The number of adult children who provide personal care and/or financial assistance to a parent has more than tripled in the last 15 years. Currently, 25% of adults, mostly Baby Boomers, provide some care to a parent.[1]

On average, most caregivers are women (66%) who are 49 years old, married and employed.[2]  Being a caregiver means attending appointments, providing hands-on support, and “checking-in” often during work hours, making it difficult to juggle those duties with the demands of a career. No matter how flexible the schedule, caretaking obligations can negatively affect earning power and ultimately impact an employee’s ability to save for retirement. A national study of women who provide care reveals the struggle of balancing care and career:

  • 33% decreased work hours to provide care
  • 29% passed up a job promotion, training or assignment
  • 22% took a leave of absence
  • 20% switched from full-time to part-time employment
  • 16% quit their jobs
  • 13% retired early

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In addition to impacting the ability to save, caregivers often have to tap their savings to pay for the care of their loved one. Co-payments, prescription costs, food, transportation services, home heath aides, and home modifications typically are among the expenses caregivers cover to the tune of around $5,000 a year.

The family caregiver trend will only gain steam as each generation’s life expectancy elongates. Here are helpful tips from for your employees that may be required to take care of their parents:

  • Establish an emergency savings account, pay off debt and maximize retirement savings opportunities before caregiving demands hinder your ability to do so.
  • Determine whether long-term care insurance is a viable option for your loved one.
  • Consider how you could approach siblings or other potential caregivers to discuss the emotional and financial realities of caregiving. Caregiving is a tremendous responsibility which has the potential of serving as a catalyst for family conflict in the absence of clear communication and understanding.
  • Make a commitment to continue to save for retirement through either a traditional or Roth IRA or a Simplified Employee Pension.
  • Put safeguards in place to help you resist the temptation to spend your 401(k) or IRA money to pay caregiving expenses.
  • Engage with legal counsel who can help in executing the necessary legal documents, such as a durable power of attorney, health care proxy, living will, or living trust.

For nearly 30 years, Brinker Capital has followed a disciplined multi-asset class approach to build portfolios that integrate an investor’s investment objectives and goals to ensure that their assets are effectively meeting their needs. Brinker Capital Wealth Advisory provides customized portfolios for business owners, individual investors, and institutions with assets of at least $2 million. An overview is available of the services provided by Brinker Capital Wealth Advisory. Find it here >>

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

[1] The MetLife Study of Caregiving Costs to Working Caregivers. (June 2011). MetLife Mature Market Institute.

[2] Family Caregiver Alliance National Center on Caregiving. www.caregiver.org.

Prevent Social Media from Leading Thieves to Your Doorstep

John_SolomonJohn Solomon, Executive Vice President, Wealth Advisory

As the class divide widens, modesty has become increasingly important to the wealthy. A recent study indicates nearly nine out of every ten wealthy individuals (89%) believe in the concept of stealth wealth–the idea of keeping their level of wealth under the social radar.[1]

While there are plenty of statistics to support the stealth wealth movement as an aspirational lifestyle, many wealthy Americans unwittingly leave digital breadcrumbs that could reveal their riches.

If you want to fly under the radar, you and your children need to be cognizant of how the use of social media could put the family’s reputation, and even its physical security, at risk. After all, your children don’t have to use the hashtag #RichKidsofInstagram to paint a picture of their lifestyle. Simply by posting pictures, checking in at trendy locations, or tweeting family adventures could draw unwanted attention.

Consider taking these steps to protect your family’s privacy on social media:

  • Talk to your entire family about the importance of exercising discretion on the web. It’s helpful to identify and create guidelines for the appropriate and inappropriate uses of social for everyone, regardless of age.
  • Establish an alert with Google to notify you whenever your name or your children’s names are mentioned on the Web.
  • Follow and monitor your children’s social media accounts as well as your extended family’s accounts. Many extended family members may post pictures of their favorite Aunt and Uncle’s summer home, and a seemingly harmless caption could lead na’er-do-well’s to your door.
  • Have different user names/passwords for each account.
  • Regularly change and be more creative with passwords. If you are like most people, you use a password you can remember … like your dog’s name. Savvy hackers, however, troll social media sites for pictures of your pets and captions that reveal their names – which often provide fruitful password clues.

Now, managing your online presence is potentially time consuming that you neither have the time nor inclination to pursue; however, there is help. Services and applications exist to help you keep private information off the web, while also offering online reputation management services. The fact that there are so many resources available in social media protection and management is a testament to how important you must take it.

[1] New Elite: Inside the Minds of the Truly Wealthy, Jim Taylor, Doug Harrison and Stephen Kraus, p. 57

The Brinker Capital Wealth Advisory team delivers service and support to meet the unique wealth management needs of high-net-worth and ultra-high-net-worth investors, family offices, institutions, and endowments. The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Wisdom, Not Just Wealth

John_SolomonJohn Solomon, Executive Vice President, Wealth Advisory

When it comes to passing assets down to the next generation, many parents worry heirs are ill-equipped to handle sudden wealth. In a recent survey, 80% of Americans said they planned to transfer their wealth, but only 45% actually had a plan in place (State Street Global Advisors). For those with a plan, the focus seems to be on the technical aspects of the transfer—wills, trusts and other estate planning strategies.

Wills and trusts, when prepared correctly, can help transfer wealth efficiently and effectively. They help provide direction on how to divvy out assets and can even give guidance to heirs about how to manage this new wealth. An ethical will, on the other hand, aims to transfer intangibles like life lessons, core values, aspirations, and wisdom.

Ethical wills, also known as legacy letters, are not legally binding, but they present a way to talk about values and beliefs pertaining to wealth and help to share personal lessons you have learned along your journey. Most importantly, it helps you articulate what it is about money that is important to you; how your wealth fueled your passions and enabled you to support the ones you love. It’s a place to talk about your past financial successes and failures.

shutterstock_240954376Money has long been considered a taboo topic because it is emotional and highly revealing. How you handle your money and the thought-process you use for spending and making investment decisions speaks to your core values and the inner force driving your actions. An ethical will can help you describe your relationship with money, explain how you used your wealth to bring your hopes and aspirations to fruition, and how you would like your wealth to serve the next several generations. It also gives you an opportunity to provide historical perspectives and references and bring to light past financial successes and failures. You can explain how your wealth was initially created and if it was even passed down through the generations prior. The goal in sharing your family’s financial ancestry is to emphasize family values and the profound impact they have made in your life.

Communication is the key element of successful wealth transfer. An ethical will gives that one last opportunity to punctuate what truly matters to you about the wealth your heirs will inherit.

The Brinker Capital Wealth Advisory team delivers exceptional service and support to meet the unique wealth management needs of high-net-worth and ultra-high-net-worth investors, family offices, institutions, and endowments.The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Guiding Your Child to Financial Independence

John_SolomonJohn Solomon, Executive Vice President, Wealth Advisory

Good money management is a fine example of a skill best learned young. The earlier your child gains control over their financial world, the more time your child has to make thoughtful decisions that bring them closer to financial freedom and the fulfillment of their life goals.

You can guide your child towards financial independence by imparting these valuable lessons:

Promote Him/Her to Account Manager

The best way to encourage financial responsibility is to make your child responsible for their financial decisions.

When your child is young, you most likely make all of the financial decisions for them. You probably opened their first bank account when he or she was just an infant. You instruct when to make a deposit and when money should be withdrawn.

At some point, well before the child reaches the age of maturity and can legally take independent action on the account, you should begin to cede some control. The child should start to take on the responsibility that comes with managing the account, getting comfortable with the decision-making needed to guide financial growth. After all, this is the money that will fund future whims.

Once children feel ownership over some pool of money, it should be the source of funding for non-essential items. As the account manager, the child then must decide whether he or she wants something badly enough to take money out of their account. If money is spent from the account, your child will have to figure out how to replenish it. Discretionary purchases exceeding the amount available in the account should be discouraged, to emphasize the notion that money is a limited resource.

Let Consequences Teach

There comes a time in a young adult’s life when they must live with the consequences of their decisions and circumstances. For example, often young drivers fail to consider insurance, fuel, and routine maintenance when they calculate how much they can afford to spend on a car. Increased expenses are a natural consequence of car ownership. Sometimes, these overlooked costs dawn on the teen only after the uninsured car is in the driveway, with an empty gas tank. This is a prime time for natural consequences teach the lesson. If you swoop in to protect your child from a painful lesson, they learn an entirely different lesson. They learn that when their money runs out, they simply need to tap into yours.

Encouraging Surfing

Before your child makes a purchase, insist upon comparison shopping. Encourage your son or daughter to surf the internet to explore the best deals available.

Make Them Honor Financial Commitments

Teenagers can come up with all kinds of creative excuses for not following through. Backing out of commitments, especially financial commitments, should be non-negotiable. If your child asks you to float them some money for an impulse purchase, make them pay you back. If your child agrees to shovel a driveway or babysit a neighbor, make sure they show up, on time and ready to work.

Set Guidelines

Before your child receives his or her first paycheck, you should talk about the importance of saving for both short- and long-term goals. Set the expectation that each a certain percentage of pay period should go towards meeting those objectives.

Give Incentives

Some children seem hardwired to spend their money as quickly as it is earned while others save every penny. To encourage saving, consider providing financial incentives. For example, you may deposit $10 for every $100 your child puts in the bank.

Give Them a Peek

Many families don’t talk about money. Parents often worry their child will misconstrue the information, share it with others, become complacent, or endure an unnecessary burden. When you explain certain aspects of your financial life to your child, however, it provides context and clarity to your decisions. It also allows you to talk about what money means to you. Nothing makes an example clearer for a child as when you explain trade-offs you have made in your life, like buying a smaller house closer to work, so you spend less time commuting and more time with the family.

The Brinker Capital Wealth Advisory team delivers exceptional service and support to meet the unique wealth management needs of high-net-worth and ultra-high-net-worth investors, family offices, institutions, and endowments.The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.