Episode 26 - Why You Should Choose an Independent Trust Company for Your Estate Planning with Sarah McGrath

Mar 27

In this episode of Your Estate Matters, Nicole and Greg, alongside guest Sarah McGrath from Heritage Trust, explore the benefits of professional executor and trustee services offered by independent trust companies. Sarah, with over 15 years of financial sector experience, explains the advantages of choosing a professional trust company over family members or friends. They discuss the types of trusts managed by Heritage Trust, the qualities of a good trustee, and the importance of fiduciary duties. The episode aims to help listeners make informed decisions about their estate planning needs.

Transcript:

Nicole 00:00:02 Hello and welcome to Your Estate Matters with your hosts, my colleague Greg Brennand and myself, Nicole Garton of Heritage Trust.

Greg 00:00:09 Your Estate Matters is a podcast dedicated to everything estates, including building and preserving your legacy.

Nicole 00:00:16 If it's estate related, we'll be talking about it. We're having the conversations today that will help Canadians protect their families, their assets and their legacies tomorrow.

Greg 00:00:34 With a city on your estate matters is Sarah McGrath, Chief Financial Officer, Chief Compliance Officer and Senior Trust Officer at Heritage Trust. With over 15 years of experience in the financial sector, Sarah helps ensure Heritage Trust financial success, regulatory compliance and client fiduciary duties as well as running trusts. A graduate of the University of British Columbia with a Bachelor of Arts, Sarah is a Certified Professional Accountant as well as a trust and estate practitioner. Beyond the professional achievements, Sarah enjoys always adventuring in the mountains, exploring them with her husband, two kids and dog. Sarah also is actively involved as the secretary for her children's ski clubs, reflecting her community spirit.

Greg 00:01:22 Sarah, thanks for being with us here today to discuss professional executor and trustee services. Tell us about yourself and how you became Chief Financial Officer, Chief Compliance Officer and Senior Trust Officer at Heritage Trust.

Sarah 00:01:34 Well, thanks for having me, Nicole and Greg. So early on in my career, I started out as an accountant at a national investment firm. It was there that I discovered that not only do I enjoy accounting and the financial reporting side of the business, but I also enjoy the regulatory compliance side of the business. So after a number of years working there, I ended up going over to another trust company that was just getting started where I was given the opportunity to take on a controller role. It involved financial accounting, regulatory compliance, but it also involved a lot of client facing work with trusts and estates, which I also discovered I really enjoyed. As my role in that company evolved, I started taking on more and more responsibility and fast forward a number of years, and Nicole approached me with the opportunity to join Heritage Trust, and I knew that I wanted to work in a collaborative environment with people that had the same goals for the business as I do, so I jumped at that opportunity and I'm really enjoying my role at Heritage Trust.

Sarah 00:02:39 I love that it's not a stereotypical accounting role. I like that I get to be client facing, but I also really like that governance side as well.

Nicole 00:02:48 And I think we work great as a team.

Greg 00:02:50 Absolutely. And tell us about what an independent trust company is and what services it offers families. And in that a boutique version of it?

Sarah 00:03:01 Sure! So an independent trust company is a company that's not affiliated with a larger financial institution. So unlike some of the bank trust companies, Heritage Trust is much smaller. We're located in British Columbia. We don't have a head office in Toronto. We aren't selling any products that some of the larger financial institutions sell their clients. And that can kind of take away any conflicts of interest that the trust companies may have about putting their trust in estate assets into bank products. The services that we offer can include managing estates trusts, acting as power of attorney, or sometimes being appointed committee by the courts should the need arise.

Nicole 00:03:48 So why would somebody consider a professional trust company rather than a family member or friend, to act in those roles?

Sarah 00:03:55 I think the number one reason you would pick a trust company to take on those roles would be the experience that the trust company brings to the table.

Sarah 00:04:02 Most people don't manage trusts and estates on a day to day basis, and they probably don't have an understanding of all the obligations that come with taking on those fiduciary roles. Other things that might want to be considered are the time that it takes to administer an estate. If you have a family or you're working full time, it can be another full time job to manage an estate or a trust, depending on the needs of the beneficiaries and the situation of the family involved. An independent trust company can also bring in emotional objectivity, where a neutral third party and we can manage our fiduciary responsibilities without being influenced by the beneficiaries or the family and friends that may want to try and get involved. We also bring a team of experts that have a legal, financial and administrative background, and we can make sure that an individual's wishes are carried out as they've identified on their will and their trust documents. We can help prevent or reduce conflicts among family members, and ensure that decisions are made in the best interest of all beneficiaries.

Sarah 00:05:12 If you choose a professional trust company, you can have peace of mind knowing that your financial matters are being handled with the utmost care and competence.

Greg 00:05:22 It is an independent trust company. Differ from trusts companies affiliated with financial institutions. So you've sort of covered it, but in the boutique sense perhaps like explain maybe non depository.

Sarah 00:05:34 So heritage trust is non depository as Greg just mentioned. Which means that we're not actually holding a client's assets. So that gives us the ability to work with existing financial advisors or to manage existing real estate portfolios in a way that aligns with a client's objectives.

Greg 00:05:55 So we could be using the family's long term financial advisor.

Sarah 00:05:59 Absolutely.

Greg 00:06:00 To continue. Management of the assets. But we might oversee it in a fiduciary role.

Sarah 00:06:05 Absolutely. And we actually really enjoy doing that because it you know, it broadens our network and we get to work with a lot of skilled individuals and professionals.

Nicole 00:06:14 So let's talk about how an independent trust company doesn't have any conflicts of interest. For example, we're not going to be selling our own products or trying to cross-sell.

Nicole 00:06:26 We don't have an incentive to benefit our own organization over and above that of the best interests of a beneficiary. How do you think that impacts decision making around choosing who families might select, particularly those with independent advisors?

Greg 00:06:42 I think families are assured that we aren't trying to compete and give them advice based on something that will benefit us, because most of them that have approached us either naming us executor or power of attorney, have already signed fee agreements, so they're well aware of what the fees are. And both parties have signed the documents and our fees are on our website to be found as a starter. And I think they feel that they're not being rushed into anything when they're being consulted. The process has to take place. You have to get everything established. And then the documents that actually created our relationship, which could be the POA or the will that's going to dictate everything, but how that's all put together is pulling the teams together. So why would we move a trusted financial advisor to another adviser when very understand the family?

Nicole 00:07:33 We maintain long term relationships, so we keep the family's lawyer.

Nicole 00:07:37 We keep the family's accountant. We keep the family's investment adviser. We don't have incentive to move money into our own organisation, for example.

Greg 00:07:44 Right. And the only time that might change would be if the long term advisor, perhaps is retiring and didn't have a continuity that the family was happy with. Or if this family came to us in conflict where we're a neutral party and we just have to replace everybody. Just they may have done nothing wrong just to create a neutral stance. And that could be management of buildings or anything like that, so that they all know that they're getting fair, informative information in a timely fashion.

Sarah 00:08:12 And another thing I would add is that when we have a newly formed trust where there may be a large amount of investable cash available, we're not forced to keep that cash in our own firm. In fact, we can't. We can actually find an investment advisor that's going to be best suited to manage those funds, and that may have experience with beneficiaries that have similar needs. So we can pull from their experience and find the best fit for the beneficiaries.

Nicole 00:08:42 So let's talk about those trusts, Sarah. So what are the various types of trusts that we manage on behalf of clients and heritage trust.

Sarah 00:08:49 So we manage your typical family trust. We manage a number of disability trusts. Where perhaps there's a disabled child or a disabled adults. We manage trusts that have been set up for minor beneficiaries anyone under the age of 19 in BC. We manage joint partner trusts as well as alter ego trusts, and those are trusts that are set up for individuals that are over the age of 65.

Nicole 00:09:17 So what makes a good trustee?

Sarah 00:09:20 A good trustee is someone who is knowledgeable, impartial, responsible, and trustworthy. They need to have an understanding of the legal and financial and fiduciary obligations that are involved in managing a trust. They need to also be committed to acting in the best interest of the beneficiary or the beneficiaries. Having effective communication skills can be very important. A trustee must explain decisions that are made and ensure that all relevant parties are involved and kept informed as appropriate.

Sarah 00:09:55 The other thing that a good trustee has is the ability to handle emotional complexities that may arise from family situations, as well as to set boundaries with various parties, which could be parents, siblings, grandparents, children. We need to be able to outline what our responsibility is to them.

Greg 00:10:16 So basically, the trust is created for a purpose that's described in the trust, and we're trying to flow the information to the beneficiaries about what our rules of operating the trust are and how much they're allowed to perhaps ask for encroachments of of the rules of the trust. And there's often age restrictions or budgets set in trusts.

Sarah 00:10:38 Correct.

Greg 00:10:38 That may feel restrictive to certain people within the trust.

Sarah 00:10:41 Yeah. So we're obligated to follow the terms of the trust document. And, you know, occasionally there will be people that are asking for exceptions, and we need to be able to put a foot down and say, no, it needs to be done this way or that way, and we can't be influenced by external parties.

Nicole 00:11:01 Let's clarify why people set up trust.

Nicole 00:11:03 So maybe they've got a disabled child. Maybe they've got minor children. There's what we call spendthrift trusts, so maybe there's issues with the beneficiary. They may have substance or mental health issues. Sometimes there's trust set up for tax planning purposes. Are there any other trusts that you can think of that we have?

Greg 00:11:22 Well, there would be trust that spring from wills. True. Certainly we've had one this week that creates three trusts for minors to last age 25. But generally that's the majority of trusts you're going to see. And I think the ones that are known about the least are probably the disability ones. Everybody. That's a great mystery to how to set one up. And what's a reasonable amount to put into a trust related to fees. So I think people would like some enlightenment on that. Where could they find that type of information?

Nicole 00:11:50 Well, we have a resource: disability-planning.ca, so we'll put that website in the show notes. But in summary. In British Columbia, if people are disabled, they may have something called a provincial person with disability designation.

Nicole 00:12:06 And there is an income and asset threshold in terms of their ability to continue receiving those benefits, so that individual cannot earn more than $16,200 currently annually, otherwise, their benefits start getting clawed back and that individual may not have 100,000 or more in cash or securities, otherwise, their benefits get clawed back. Although there's huge exceptions. They're allowed to own a home in a vehicle, but it's very standard planning. If you have a disabled beneficiary, maybe an intellectual disability or a physical disability, that parents will usually set up a discretionary trust, sometimes called a Henson trust, as the name from an Ontario case. And it's quite common to have a professional trust company, if not the only trustees. Sometimes we act together with a family member to maintain continuity and security for that beneficiary, to make sure their needs are met after mum and dad passed away.

Greg 00:13:04 So in that case would be a co trustee, but who would have the authority as an equal between the family and the trust company?

Nicole 00:13:11 That's a good question.

Nicole 00:13:12 So any trust company that is co with a family member, the way it generally works in practice is the family member often leads the personal care and the trust company leads the financial and legal piece. But every trust company has what's called the burden of administration, which means we have the final say in terms of financial and legal decisions. And that's just to protect our, quite frankly, our insurance and our liability. So if you had a rogue co trustee that wanted to invest in, I don't know, marshland in Florida or the latest cryptocurrency, we can have final say to perhaps say no. If we felt that that was going to adversely impact the financial security.

Greg 00:13:53 Of the right. And because the trust companies got a very high standard as a fiduciary. A person that's not normally in the business would not have as high a standard in their own mind. And it saves you from going to the court, you know, continuously.

Nicole 00:14:08 So trust companies as they should be. So if are held to the highest fiduciary duty.

Nicole 00:14:14 So in in lay terms, being a fiduciary means basically doing a good job and acting in the best interest of the beneficiary. And the financial institutions, such as Heritage Trust is held to the highest standard because this is more sophisticated and this is what we do full time. So we're expected to make prudent financial decisions, acted in accordance with the terms of the trust. And, you know, be proactive in terms of getting tax legal financial advice is required. And so that's one of the things you get with a professional trust company is that expertise. Because we manage many, many trusts.

Greg 00:14:48 Right. And when we're a committee which is kind of a higher authority than a power of attorney. We would often be, as a trust company, appointed as the committee of a state, which sounds like they're dead, but they're not. And that would be controlling the financial aspect.

Nicole 00:15:04 Well, let's explain to our listeners what comity is.

Greg 00:15:06 So when a person becomes incapable either through disease or accident or age or for whatever purpose it is sought, sometimes they'll already have a power of attorney in place.

Greg 00:15:18 But the power of attorneys may not be appropriate for the client. So then either the health district or family will seek for somebody to become a committee of person.

Nicole 00:15:30 Under the patient's property. Actor British Columbia.

Greg 00:15:32 In British Columbia. So that's an actual court designation. So there can be a medical decision made along with that. Mental tests, many mentals. They used to be called Mims and they would test the score of somebody perhaps was suffering from dementia or a stroke, had to rob them of some of their skill set. And that could just be where somebody is actually looking normal everyday and speaking normal can go to the store. But if somebody approached him and said, give me a $10,000 check. They've just lost that ability to say no. They can be influenced.

Nicole 00:16:05 For clarity under the Patient's Property Act of British Columbia. Yes. The law respects the rights of autonomy and self-determination of adults. So the threshold rightfully should be high before they're deemed to be incapable. But if two physicians, it's got to be two independent physicians are prepared to sign an affidavit confirming that that person is no longer capable.

Nicole 00:16:27 The public guardian and trustee is also notified. And you go in front of a Supreme Court judge, who then can appoint an independent person to manage that person's finances, i.e. estate and person, i.e. their body. And so it can be one individual or if it's a trust company, a trust company is only permitted to manage the estate, i.e. the funds, and then they're appointed and every two years they're required to provide comprehensive reporting to the public Guardian and trustee in respect of how they've managed those funds.

Greg 00:16:59 What is a multifamily office and what sort of multifamily office services does Heritage Trust offer to families?

Sarah 00:17:06 So a multifamily office is an advisory firm that offers integrated services to its clients. The family office services that heritage currently offers include tax, estate, business, succession and philanthropic planning, document management, recordkeeping, expense management, bill paying and bookkeeping services. We also offer financial, legal, and business education for family members. One of the things that we're seeing a little bit more frequently now is as people age, they want to hand off some of their financial responsibilities.

Sarah 00:17:46 So we're seeing more and more people that become interested in kind of a Concierge bill payment service. So we'll manage their bill payments. We'll make sure there's insurance on any real properties that they have, and we'll build that relationship with them. And often that will help build the relationship as we lead into, you know, managing their estate at some point in time.

Nicole 00:18:11 So we call that custodial services.

Sarah 00:18:12 Custodial services.

Nicole 00:18:14 And I would say we also do you know, property management is not uncommon as part of that piece.

Sarah 00:18:18 Absolutely.

Nicole 00:18:19 So I think if you've seen one family office, you've seen one family office in that it's very unique to each individual family in terms of the checklist of services. But Sarah, just like we mentioned, there's people that might be older, they want some assistance. And we're effectively their back office. Yeah. So how can listeners find us.

Sarah 00:18:39 Listeners can find Heritage Trust through our website at HeritageTrustCompany.ca. They can learn more about our services and contact us directly. We also offer 30 minute consultations, which can be booked directly on our website with either Nicole, Greg or myself.

Nicole 00:18:57 Great. Thank you so much, Sarah and Greg.

Greg 00:18:59 Thank you so much, Sarah.

Sarah 00:18:59 Thank you.

Nicole 00:19:00 This podcast is for informational purposes only and should not be considered individual, legal, financial or tax advice. Make sure to consult the advisor of your choice to advise you on your own circumstances. Thank you for joining us for this episode of Your Estate Matters. If you like this podcast, make sure to follow it on your podcast platform of choice.

Greg 00:19:22 Whether you are planning your own estate or you're acting as executor for somebody else's heritage, trust can help partner with Heritage Trust to protect your family, your assets, and your legacy.

Nicole 00:19:33 If you would like more information about Heritage Trust, please visit our website at Heritage Trust Company, RCA.

Greg 00:19:47 This podcast is produced by Pod Father Creative.