PODCAST OVERVIEW
Goosmann Law Firm Omaha Attorney Andy Simpson and Host Jeana Goosmann discuss what duties come with being a trust administrator and what it means. During this episode you will learn:
- What does it mean to administer a trust?
- How does a trust work when someone dies?
- Can a trustee withdraw money from a trust?
- Do you need a lawyer?
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TRANSCRIPT
Goosmann Law Firm (00:01):
Do complex legal issues hold you back? Let’s get energized and bring clarity to your top legal questions. This is Law Talk with the Flock by Goosmann Law Firm.
Jeana Goosmann: 0:30
Hi, I’m your host for law talk with the flock. I’m Jeana Goosmann, CEO and managing attorney, author and business owner of the Goosmann law firm. And I am here to help navigate you through the law, your business and life as a leader. And today I have a guest with me, attorney Andy Simpson, who is an estate and business attorney at the Goosmann law firm. And we’re going to be talking a little bit about administering a trust. I’m really excited to have you on today, Andy.
Andy Simpson: 0:57
Sounds great. Thanks for having me. Good morning.
Jeana Goosmann: 0:59
Good morning. And we’re talking about law talk with the flock and estates and business and trust. So tell me a little bit about your background in this area.
Andy Simpson: 1:09
So I’ve been practicing law for about 15 years now and I started in a small law firm where the bread and butter of our practice was wills, trusts and estates. And as our clients age they pass on. And the natural progression of that is to work on the probate and the trust administration after people pass away.
Jeana Goosmann: 1:30
And way back in the day you’ve got your blue on cause you’re a Creighton Bluejay just like I am. Right?
Andy Simpson: 1:35
That’s right. Yeah. I went to law school at Creighton 2004 and I also went to undergrad at UNL. So much like you we go both ways-
Jeana Goosmann: 1:44
-That’s right, Jay-skers. So I got the red on and you got the blue on today. We got it, we got them all covered. So in Nebraska we’re good.
Andy Simpson: 1:54
Very common in this office to have that.
Jeana Goosmann: 1:56
It’s true. It’s true. We have a lot of Nebraska and Creighton people here, don’t we?
Andy Simpson: 2:01
Yup. Yup.
Jeana Goosmann: 2:02
Awesome. Well you joined us in the Omaha office, the Goosmann law firm last year and we’ve been really excited to have you on the team and I know this is a strong area that you focus on.
Andy Simpson: 2:12
Yeah, it’s been great. We have been here for about nine months now and as you know very well, everything is constantly moving. We move real fast. But we work hard and have fun.
Jeana Goosmann: 2:22
Awesome. Well, your practice has been a really good fit for the firm and we’re super excited to have you on the team. So Andy, what does it mean to administer a trust? Can you break that down for the folks that are listening?
Andy Simpson: 2:35
So when I think administering a trust, I was thinking about this a little bit. There’s a whole bunch of different types of trusts, but 95% of the trust fall into the category of a living trust, which is an estate planning tool that people use to basically speed up the process when they pass away and they fund it during their life. So that way when they pass away, there’s no need for a probate. So in that realm, the administration is generally the successor trustee because the first trustee has gone, um, and they administer it by collecting the assets of the estate, paying the debts or any obligations that the decedent may have had as the trustee. And then they distribute the property of the trust to the benefactors of the trust that set forth in document. So that’s a general trust administration. It comes in a whole bunch of different packages.
Jeana Goosmann: 3:28
So there’s a lot going on here. I’m going to break this down a little bit.
Andy Simpson: 3:30
Sure.
Jeana Goosmann: 3:31
I remember before I went to law school and I sat at Creighton Law and learned about trust in the States. I always thought a trust was like a Swiss bank account or something. What is it? Actual trust? Isn’t it just a contract?
Andy Simpson: 3:42
It is. That’s right. In reality a trust is a lot like a will. It just sets forth the person. Again, talking about a living trust for estate planning purposes generally is a contract between the person who’s funding the trust with their assets and the beneficiaries of that trust. And they’re appointing the trustee to manage those assets so to speak. So it doesn’t have to be super complicated and it, most of them are not. It’s just a fabric for distribution of that person’s assets when they pass away and in a general sense.
Jeana Goosmann: 4:16
And then unlike a well where you go through probate or the court process, the trust helps keep you out of that process and therefore it’s more private.
Andy Simpson: 4:24
It does. That’s right. And so I like to use the word, I’m not sure if this is right, but I tell people it’s a little bit of a legal fiction because when you set up a living trust, you are still in charge of that trust. You fund it with your assets during your life and 98% of them are revokable. So you can change them at any time. But because the assets are titled in the name of the trust, when you pass away, the trust owns those assets and you do not need a probate to convey them to the beneficiaries as opposed to you passing away and owning, let’s say a piece of real estate. It’s now in your name alone. If you don’t put it in a trust and you need a probate to have a judge appoint someone to have legal authority to convey the title to that asset, to the beneficiaries. So that’s the difference between a probate and a trust. The trust owns the assets upon your death. So title isn’t necessarily in your name.
Jeana Goosmann: 5:15
And then in a will, that person’s called an executor and it goes through probate. And in a trust, that person’s a trustee and the trust gets administered.
Andy Simpson: 5:24
Absolutely. Right. Yup.
Jeana Goosmann: 5:25
So those are the big differences. All right. The who can be a trustee?
Andy Simpson: 5:30
Anybody really. It depends, oftentimes in the run of the mill family living trust, it usually is one of the beneficiaries; a child, a brother. If people are married, it’s usually the other spouse and then the last to die appoints really the person who does administer it. So that’s the secondary trustee. There’s, to my knowledge, no major prohibitions. I’ve seen lawyers do it, I’ve seen CPAs do it, typically the lawyer doesn’t appoint themselves as trustees, so that way they’re able to represent the trustee as legal counsel moving forward.
Jeana Goosmann: 6:05
So if somebody passes away and you know you’re the trustee of that trust, how did he get started? What’s the best course of action to get started?
Andy Simpson: 6:15
So you usually go to the lawyer who drafted the trust. And that’s important for lots of reasons because what happens is when you take on that job, you’re now a fiduciary for the other beneficiaries of the trust. And sometimes it’s simple and sometimes it is not. And so the lawyers job is to guide you through that process to make sure that you do everything correctly. In Nebraska, we have state inheritance tax. It also still needs to be paid on a trust. So you need a lawyer to do that cause that’s a court proceeding. So the second person you contact is the CPA because the trust will have to file final tax returns. And they work hand in hand with the attorneys. Now I will say really one of the reasons why people set up living trust for estate planning purposes is it’s faster upon your death. It’s, it’s more private. As you said. We don’t have to have public court filings like you would in a probate. And a good lawyer working well with the trustee can really get a trust administration done. I mean we’ve shot for 60 to 90 days after the date of death and that ultimately reduces costs. The lawyer is the first person to call it always is.
Jeana Goosmann: 7:28
So if your named trustee, you don’t need to be too concerned about it cause you get to go work hand in hand with the lawyer and they’ll guide you through the process essentially.
Andy Simpson: 7:36
Absolutely, yep. The trustee really is the laboring one to go out and identify all the debts; collect all the assets and the lawyer can really help guide them with any of the intricacies and make sure that they really convey the assets the way the trust says they’re supposed to go. Because the lawyer presumably drafted the trust and has a better understanding of the way it’s supposed to go. And you don’t want to end up in a situation where you’ve missed distributed assets.
Jeana Goosmann: 8:04
Now if the lawyer didn’t draft the trust, could they still come and hire you to help them through that process?
Andy Simpson: 8:09
Sure. That happens a lot. It happens a lot where maybe the trustee, his son and has a good relationship with their attorney, personal attorney and mom maybe wasn’t that person’s client. So it happens a lot. Really, the attorney client privilege is with that trustee or the attorney client relationship is with that particular trustee. So it’s a working relationship, whoever you’re most comfortable with.
Jeana Goosmann: 8:33
And what about a bank? When would a bank get involved maybe or a trust department and what circumstances do people tend to appoint them to be the trustee?
Andy Simpson: 8:41
So we see them a lot in special needs trusts that may go on for a long period of time. And that’s a whole different sort of realm that we haven’t discussed here. But we do see them a lot. A financial institutions appointed as trustees in trust may have provisions for distribution of assets over a long period of time where the living life of a trustee may not work. So minor children, we will see that. And banks and other corporate fiduciaries will act as those trustees and they’re obviously gonna live longer. We also see it in situations, I see in situations where I draft trusts for clients where maybe the person who we’re drafting the trust for tells me, I’m not real sure I need any of my relatives to be involved in this. They don’t get along. It’s not gonna work out well. So we have point a bank or corporate trustee to do that and they’re neutral. They abide by the terms of the trust and we remove the emotion from the equation that way.
Jeana Goosmann: 9:39
You bet. So there are options for folks that don’t have a responsible family member that they can have fill this role. They can hire someone to serve in that capacity and then you would work with them as the attorney. You’d work with that financial institution as the trustee.
Andy Simpson: 9:52
Yup. Absolutely. We’ve done it both ways. You do generally see it is usually more the relative because you know, the financial institution will charge a little bit more for a trustees fee, but you don’t want to miss the forest for the trees in that realm. And if you’re able to, avoid some conflict with that neutral party, it’s, it’s generally cost effective in the long term.
Jeana Goosmann: 10:16
Very good. Well, thank you so much, Andy, for breaking this all down and having a dialogue with me today on law talk with the flock. I appreciate you coming onto the podcast.
Andy Simpson: 10:24
You’re very welcome. This was fun.
Jeana Goosmann: 10:26
Well, thank you everyone and go make it worth it.
Goosmann Law Firm: 10:29
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