A Matter of Trusts: Benefactors, Heirs and Their Advisors

August 4, 2014 – In The News
CNBC

Edward Kabala was featured in CNBC's article, "A matter of trusts: Benefactors, heirs and their advisors." Full text can be found in the August 4, 2014, issue, but a synopsis is below.

Revocable and Irrevocable trusts have been known to help financial advisors resolve issues for clients in certain predicaments, particularly in states with complex and expensive probate processes.

Edward Kabala comments on this matter by explaining that even trustees "with the best intentions" might borrow from a trust, intending to replace the funds. "But then the beach house floats away," he said … and there goes the money.

Kabala works "as a team" with Diane Pearson of Legend Financial Advisors and other financial advisors.

He explains, “When we want to know what the assets and liabilities are, that's where the advisor comes in. The advisor usually sees people more frequently than we do. They may have some opinions that can add counterbalance in decisions. Clients usually tell their financial advisor more things than [they do] their lawyer."

Kabala also adds: "In an irrevocable trust, yes, assets can be protected, but putting my assets out of my control to beat my creditors doesn't seem a good trade-off."

Generally, however, he finds the average client has little need for living trusts, as his assets often amount to no more than a house, an insurance policy and a pension. (Exceptions would be clients living in probate-heavy Florida, California or Arizona.)

Contrary to expectations, "there is no creditor protection in a revocable trust," says Kabala. "Creditors have a right to get their money. In an irrevocable trust, yes, assets can be protected, but putting my assets out of my control to beat my creditors doesn't seem a good trade-off."

Advisors can help. To that point, 70 percent of probate fights come from lists of assets not matching ownership documents, Kabala said. The wrong account gets emptied, and someone is left out. Impress clients with the value of tracking assets.
Kabala concludes, "It's important that people learn this from advisors…they can provide a much-needed service if they do it right."