When our clients are deciding on a trustee, they generate many questions. In Part II of this series of FAQs, we again supplemented the answers with real-world examples from James O’Neil, a San Francisco estate planning attorney (https://oneil.legal/). You can read Part I here.
Is Sunstone Trust Company licensed?
Yes! Sunstone Trust Company is fully licensed and authorized to provide trust services by the California Department of Financial Protection and Innovation.
Sunstone Trust Company is among a select few independent trust companies held to the very high standard of California’s rigorous regulatory structure, so we must comply with certain strict capital requirements, are subject to audit of its practices, and must comply to the state’s financial conditions. Our Board of Directors and management are all experienced professionals and have been approved to serve in their roles by the California Department of Financial Protection and Innovation.
Real-world example from James: When individuals are named as trustees, they lack the breadth and depth of knowledge in the fairly complex world of government compliance work, asset and liability management. Most people have experience managing their savings and checking accounts, or filing their tax returns, but that experience is not directly translatable to managing the complexities of a trust and/or an estate.
In addition, there are many possible traps for the unwary that can carry substantial financial penalties or otherwise harm the assets of the trust, which can reduce the amount the beneficiaries may inherit, and may leave the trustee personally liable for the damage. A lot of non-professional trustees may not be aware of these potential issues, which is why it’s important to work with a licensed trust company.
What if you only want us to be a co-trustee?
It is perfectly acceptable if you want to designate Sunstone Trust Company as a co-trustee. Depending on how you want to administer your trust, you may want to delegate some responsibilities to us and keep some trustee responsibilities and control for yourself. We are flexible and work with many clients as a co-trustee.
Real-world example from James: There are two great examples of when to appoint a professional trust company as a co-trustee. The first is when you want a non-professional trustee to be in charge of a trust administration, but you also want a professional trustee to oversee that the trust is administered correctly.
The second example is when you have a non-citizen trustee, the law will require that at least one American citizen trustee (a citizen or a professional trust company) because the U.S. government wants to ensure it is paid estate-related taxes for trusts, capital gains, etc.
What if you only want us to serve as a successor trustee?
It is also appropriate if you only want to designate Sunstone Trust Company as a successor trustee to assume responsibility upon the death of the original trustee. We are flexible and are designated as a successor trustee by many clients.
Real-world example from James: There are many trusts when the person setting it up does not have family members (brother, sister, children, parents) or close friends who they can comfortably designate as their trustee. In other words, they don’t have a deep enough bench.
Many people think it’s smart and convenient to designate a son or daughter to save some money over administration costs. However, in the long run, they are making a potentially expensive error in judgement.
Furthermore, if you ask any California Probate Judge who should be appointed as a successor trustee, he/she will tell you to designate a professional trustee with the financial and legal knowledge, as well as the resources to properly administer the trust.
What if you want us to serve as an executor?
An executor is someone who carries out the wishes of the trust or estate upon death. The more affluent your family, the more important the role of the executor becomes. Sunstone Trust Company has deep experience in the multifaceted role of executor services.
Executor services include collecting money owed to the estate, coordinating with family members, marshaling estate assets, notifying creditors and paying valid debts, managing the estate’s assets, making distributions to beneficiaries, filing the decedent’s final income tax return (if requested), choosing a tax year for the estate, completing and filing the federal tax return, submitting a detailed accounting to beneficiaries and / or the probate court, and coordinating with other members of the advisory team.
Many clients designate Sunstone Trust Company both as trustee and as executor. We can accept either or both designations.
Real-world example from James: I have never seen a self-appointed executor who succeeded in Probate Court. I recently took over a case where a family member was appointed as executor five years ago. This case was so straight-forward, and this was such a failure, it was like being unable to boil water. It should have taken one year if managed by a professional executor, but this one was unable to successfully perform the obligations required by the law. The sole heir who was to inherit more than one million dollars died during the delayed administration, and his heir inherited the money instead.
In addition, a professional trust company will bring expertise in understanding the legal process as an executor by the court. They will gather and marshal the assets for the estate, resolve potential issues with creditors, and manage any litigation-related issues that come up with heirs or beneficiaries of the estate in preparing the compliance documents required by different government agencies in having a petition for final distribution appointed by the court.
Can Sunstone Trust Company assist you in your philanthropy?
Yes! Many of our clients rely on us to ensure that gifts are made to the right causes and charities. Your trust can designate as many beneficiaries and charities as you wish. Trust and tax laws give you considerable flexibility in your philanthropic goals.
Real-world example from James: The trust company can carry out charitable gifts from a revocable living trust, from a variety of irrevocable charitable trusts, as well as charitable lead trusts and charitable remainder trusts.
Doing this yourself can be extremely complex, but a trust company can serve as the trustee to ensure that the financial management and tax compliance is done properly so it is not disqualified by the IRS.
For example, I had a client who had grown an investment to $10 million in tech company stock with a very low basis on capital gains taxes. By transferring this to a charitable remainder trust, the stock could be sold free of capital gains tax and the client received a stream of income for 10 years, a significant charitable tax deduction, and the remainder of the funds will go to his designated charities after that 10-year period.
What if you want us to act as your agent instead of a trustee?
We are happy to act as your agent in those cases where an agency relationship best meets your goals instead of a trustee or executor role.
When we act as your agent, our responsibilities can include supervising your investments, guiding your real estate holdings, or communicating important updates to your family members. Of course, these roles are carried out with an eye on continually monitoring your assets and interests according to your family’s goals.
Real-world example from James: “Agent” is a durable power of attorney who typically serves when you are incapacitated. While your trust has control over most of your assets, the agent has control of the other assets, such as your IRA, 401(k), stock incentive plans, and any other assets not in their trust.
There is some overlap, but the durable power of attorney can manage your assets if you are still alive, but unable to manage them yourself. It is critically important that your assets can be managed, invested, and protected in the event that you are incapacitated to make sure that you are properly cared for and that you’re protected from financial abuse and fraud. This scenario happens more often than you might think.
How much do Sunstone Trust Company’s services cost?
Please see our Fee Schedule and Services page for the costs of our various services. We are competitive in our pricing, and we work hard every day to demonstrate the value we bring to your family. We are able in some cases to negotiate custom fee arrangements based on your particular facts and circumstances and we are happy to talk to you about that.
Real-world example from James: The efficiency that comes with a professional trust company is going to save you time and money in the course of normal administration, as well as head off any possible risk of litigation caused by mistakes or errors caused by non-professional fiduciaries.
In California, the fees are set by law for an executor, so whether you pay an inexperienced family member or a professional trust company, the fees will be the same. You’re not actually saving money by hiring an incompetent family member vs. appointing an experience trust company.
However, in court-supervised trusts, the fees for a non-professional trustee is slightly lower (0.5%), but not necessarily substantially lower (1.0%).
This completes Part II of our extended FAQ answers. Again, here are the answers to Part I.