Managing Complex Assets
Are You Up To The Task?
Sandy Calbreath, Trust Officer
To the uninitiated, the duties of a trustee might seem pretty straightforward: manage investments, collect income, pay bills, prepare taxes and keep good records of what you do. In fact, if the trustee is knowledgeable, the assets simple and the family convivial, the job can be fairly simple (albeit time-consuming). Unfortunately, most people do not live in a picture-perfect world. Consider the following real-life trust situation:
“Mary Lou” and her husband “Alex” owned a retail business when Alex died suddenly at a relatively young age. Grieving and in poor health, Mary Lou was unable to operate her husband’s business. She turned to well-meaning friends who quickly realized that they were not up to the task of managing her business and financial affairs. Fortunately, she had a caring investment advisor and an attorney who introduced her to Northwest Trustee & Management Services.
When we stepped into the picture as trustee, we found a business that was in shambles. Only one store remained open and it was operated by unsupervised employees. Vendors were unpaid, rent and utilities were in arrears, there had been no tax reporting for several years and business records were non-existent. At best, there was gross mismanagement, and at worst, downright dishonesty.
Personally, Mary Lou was estranged from her adult children and felt desperately alone in the world. She had recently moved, and due to her illness and emotional state, she was unable to finish unpacking her belongings or arrange for needed home repairs. To compound matters, a close relative had embezzled money from the business and fraudulently incurred bills in her name.
Her finances were equally in disarray. Although her husband had died several years earlier, she had never applied for his social security benefits. A substantial insurance policy had been liquidated in the prior year, but she never received the check and could not get a response from the company. She did not understand her investments and relied totally on others to handle her financial affairs for her. Perhaps worst of all, she had not filed tax returns for several years.
Our staff rolled up their sleeves and set out to put her world back in order. Within months, the store inventory was sold and all debt was paid. A contractor was hired to renovate her condominium and someone helped her unpack, clean and make it a home. We applied for her social security benefits and obtained a replacement check from the insurance company. Then we worked with her investment advisor to create an asset allocation that was appropriate for her situation. We literally gathered a pickup truck full of old documents and delivered them to an accounting firm. With their help, we were able to work with the IRS to file back tax returns and satisfy her tax liability.
It was a big job, but as professional trustees, we were up to it. Granted, the situation was a little extreme, but in reality most people have personal or financial situations that are perplexing and time-consuming. Before you agree to serve as trustee, know what you are getting into. Then ask yourself if you have the time and expertise to do the job. Before you say yes, make sure you are up to the task.
Print Date: Spring 2008