Third Quarter 2015
1 (888) 529-2776
www.GreatPlainsTrust.com
Can You Trust Your Trust?
Often people think that if they have had a Will or a Trust prepared their estate plan is in order. Simply
having documents prepared does not guarantee that your estate planning goals will be met. In fact, these documents
may create a false sense of security. Failure to title assets correctly or maintain the correct beneficiary designation
can have disastrous effects. Consider these examples:
• John and Mary had worked with the partner of a major law firm to prepare their estate plan. The law
firm had prepared revocable trusts for John and Mary, and the plan was kept up to date with current laws through
regular meetings with their attorney. While they were not thrilled about the legal fees incurred, they knew it
would be worth it to ensure their plan was up to date. Over the years John and Mary moved into a larger home
and then downsized into a smaller home, changed investment advisors and purchased their dream vacation home.
When the new homes were purchased and new accounts were opened they were not titled in John and Mary’s
trusts. When John died, Mary was shocked to discover that because things were not titled in trust several of their
(Continued on page 2)
Trustee Selection - Maintaining Family Unity
The benefits of trust utilization in estate planning are well espoused these days. In the right situations
establishing a trust can assist in probate avoidance, tax planning and asset protection for beneficiaries. However,
often missed in these discussions is the dramatic effect that trustee selection can have on one’s family following
death.
Timothy O’Sullivan, an erudite voice on the topic of family harmony, maintains that the choice of the
1
In most cases, a parent’s natural
trustee is the single most important decision that impacts family cohesion.
inclination is to name a mature adult child as trustee rather than utilizing a disinterested non-family member. The
rationale behind this decision tends to be twofold. First, the parent’s tendency to grossly underappreciate the
family harmony risk in naming a child (or children) as trustee. Secondly, parents tend to grossly overestimate the
2
benefits that may be achievable by having a family member serve as trustee.
This is typically because parents view the future administration of their trust as a relatively uncomplicated
family matter best left to family members. Unfortunately this view, more often than not, is misguided. The
administration of a trust is a complex fiduciary matter that, when coupled with the infusion of family dynamics,
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can quickly turn divisive hindering both proper asset administration and grantor intent. In fact, according to
O’Sullivan, there is a thirty-three percent (33%) chance of significant family discord when there are multiple
4
children as beneficiaries and all or a portion of the children serve as the trustee(s).
The reasons for this are extensive. Primarily, we are creatures of emotion. The grief over the loss of a
parent can oftentimes overwhelm children and their spouses to the point where objectivity is lost. In such an
environment, adult children often become indignant and harbor feelings of rejection by their parents’ choice to
overlook them as trustee. Some parents will try to overcome this notion of favoritism by naming all or multiple
(Continued on page 3)
®
The Lost Art of Human Contact
Steve Soden, President and CEO
There is no question that rapidly evolving technology, especially in communications,
has been positive in so many ways. That said, there are times I really want to talk to a human
and I’m finding it increasingly difficult to do so. Recently in calls to an electric utility, phone
company, and newspaper, I literally wasn’t offered the option to talk to a live human. Perhaps if
I was considerably younger, I wouldn’t miss the lack of personal touch because in many ways I
wouldn’t have really ever known it.
This trend is particularly evident in the banking industry as so much customer business is now
completed over the phone and computer. Personal relationships and branch locations are now on the wane
as the traditional relationship with a local banker is often becoming a thing of the past. The composition of
the banking industry has changed significantly over the past decade, particularly for the smaller local banks.
In 2004, there were 4,239 commercial banks, savings banks, and savings institutions with assets under $100
million. By the middle of last year that number had receded to 1,959. Most merged into larger organizations
with pressures to cross- sell multiple products and services.
At GPTC, we are deeply committed to technology and the continuing developments associated with
enhanced service and communication. However, we also have a deep commitment to human contact and the
value of relationships. In short, when you call Great Plains Trust Company, you will always be able to talk
to a human during normal business hours. Emails, texts and voicemails are wonderful advances, but there
are many times it is hard to replace the give and take of a personal conversation. Remember that GPTC has
Estate Attorneys, Account Executives, and experienced Operations Specialists all ready to support you and
your needs any way possible. And, you won’t have to punch an endless series of buttons to get them. As
always, we deeply appreciate your business and confidence.
Can You Trust Your Trust? (continued from page 1)
assets would have to go through probate, increasing the cost and time required to settle John’s estate. While the
law firm had kept the trusts current from a legal perspective, no one was watching to make sure that things stayed
properly titled.
• Paul’s second divorce was finalized 17 years before he died. Imagine his children’s surprise when
they discovered that Paul’s second ex-wife (not their mother) was still named as the primary beneficiary of
an IRA and life insurance policy. The children challenged the issue in court, but like in many states there was
no law that automatically revoked a beneficiary designation in favor of a divorced spouse. Failure to change
beneficiaries upon a divorce can result in assets going to the wrong person. Even if there is a statute that revokes
a beneficiary designation upon divorce, clients need to name a new beneficiary or risk having their estate named
as the beneficiary which is the least tax efficient beneficiary and results in probate.
• Ron and Margaret, husband and wife, named each other as beneficiary of their IRAs. They invested well
and had significant balances when Ron died. After meeting with her advisor Margaret determined that she did not
need all of Ron’s IRA and wanted to pass some of it to her grandchildren, who could stretch out the IRA over their
long life expectancies. Unfortunately, Ron had failed to name any contingent beneficiaries, and Margaret was
forced to either take the IRA or have it go to Ron’s estate, which resulted in a negative tax impact and a probate
procedure. Had Ron named contingent beneficiaries, Margaret could have disclaimed part or all of the IRA,
passing it to more favorable beneficiaries.
If you receive a call from GPTC, it is because we are actively contacting clients to remind them to title
accounts and property correctly and to update us on their current estate plan in order to avoid the unfavorable
outcomes above.
Trustee Selection (continued from page 1)
children as co-trustees. However, the greater number of family members serving as co-trustees tends to increase
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the risk of family discord. Family members habitually perceive different administrative matters with varying
levels of materiality. Many times one or two of the children are called upon to do a disproportionate amount of the
administration thereby cultivating resentment towards the remaining trustees. In the event that an even number of
children are named as co-trustees, administrative deadlock can occur requiring judicial intervention.
Notwithstanding family dynamics, administering a trust is far from a simple endeavor. Family members
are generally less qualified than experienced third parties in complying with regulations governing trust
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administration. These requirements continue to grow in complexity and range from prudent investment decisions
to knowing what disclosures must be made, or, conversely, kept confidential from the other family members.
While children initially view a trustee appointment as a positive, this enthusiasm quickly evaporates as the burden
of administering the estate manifests itself. Trustees must take on time consuming tasks such as assessing the size
and composition of their parents’ assets, determining title, extinguishing liabilities, complying with tax filings,
and making proper distributions to beneficiaries. Many times the family member trustee is expected to perform
said duties for little to no compensation. When compensation is paid to the trustee it usually creates resentment
among the other beneficiaries because the burdens of the trustee are typically underappreciated.
The growing complexity and maze of regulations in trust administration also subjects family member
trustees to potential liability for unintended errors in trust management. Personal liability can be both financially
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and emotionally devastating to a family member serving as trustee. Not only is it disastrous to the family
member serving as trustee, the remaining beneficiaries may be left in the lurch because the family member trustee
does not have sufficient assets to compensate the aggrieved beneficiaries for their losses.
The simplest way to reduce the risk of family disharmony is by choosing
an experienced and well-capitalized corporate fiduciary to serve as trustee.
A corporate fiduciary will lend objectivity and will relieve your children of
the administrative burdens highlighted above. The additional costs of having
a corporate fiduciary serve as trustee are normally quite modest (typically
around one or two percent of assets), especially when compared to the potential
costs of fiduciary errors, outside professional advice and legal fees, and family
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disharmony that can accompany the appointment of a family member trustee.
When appointing a corporate trustee, parents can allow children to maintain control over the trust administration
by granting them the power to discharge the current trustee in favor of new independent corporate trustee. If the
children are unhappy with the administration they can make a change without incurring the burden and family
strain that accompany a family member serving as trustee.
Oftentimes the topic of family harmony is not given its due attention in the estate planning conversation.
When presented with a complete discussion of the pros and cons of fiduciary choices, it has been found that a large
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majority of clients will choose a third party over a child. Such a choice can go a long way toward preventing
family discontent that may linger for lifetimes.
John Thompson, II is a partner with Kennedy Berkley in Overland Park, Kansas concentrating his practice
in trust and estates and real estate matters.
1
See generally Timothy P. O’Sullivan, Family Harmony: An All Too Frequent Casualty of the Estate Planning
Process, Marquette Elder’s Advisor Vol. 8 No. 2, Spring 2007. 2 Id. 3 Id. 4Id. 5Id. 6Id. 7Id. 8Id. 9Id.
Collective Fund Performance (6/30/2015) - NET PERFORMANCE
Pension Fund
YTD
Annualized
1 Yr.
Annualized
3 Yr.
Annualized
5 Yr.
Annualized
10 Yr.
Annualized
15 Yr.
Annualized
20 Yr.
GPTC Equity Fund
1.27%
-1.25%
11.79%
14.04%
8.94%
12.33%
12.62%
GPTC Large Cap Fund
5.27%
14.64%
19.79%
16.68%
8.24%
N/A
N/A
GPTC USA Global Fund
3.76%
7.35%
17.62%
16.98%
9.29%
4.94%
8.75%
GPTC Small Cap Fund
4.36%
1.75%
13.77%
13.61%
8.08%
10.13%
12.80%
GPTC Science & Technology
9.42%
11.95%
19.99%
19.64%
12.09%
5.20%
N/A
GPTC Mid Cap Fund
7.70%
7.98%
16.10%
14.75%
9.09%
N/A
N/A
GPTC International Fund
3.34%
-2.27%
8.57%
6.44%
N/A
N/A
N/A
GPTC Fixed Fund
6.12%
6.10%
11.55%
12.92%
8.66%
9.05%
9.11%
Indices (6/30/2015)
Market Index
YTD
Annualized
1 Yr.
Annualized
3 Yr.
Annualized
5 Yr.
Annualized
10 Yr.
Annualized
15 Yr.
Annualized
20 Yr.
S&P 500
1.23%
7.42%
17.31%
17.34%
7.89%
4.36%
8.91%
Russell 1000 Growth
3.96%
10.56%
17.99%
18.59%
9.10%
2.19%
8.25%
Russell 2000 Growth
8.74%
12.34%
20.11%
19.33%
9.86%
4.84%
7.48%
Russell Mid Cap Growth
4.18%
9.45%
19.24%
18.69%
9.69%
N/A
N/A
Russell 3000 Growth
4.33%
10.69%
18.15%
18.64%
9.17%
2.39%
N/A
MSCI All Country World Ex-US
4.03%
-5.26%
9.44%
7.76%
N/A
N/A
N/A
BofA Merrill Lynch HY Master II
2.49%
-0.55%
6.80%
8.41%
7.75%
7.55%
7.41%
Past performance is not indicative of future results. Investments are not insured by the FDIC, are not deposits or other obligations of Great Plains Trust, and
are not guaranteed by Great Plains Trust. Investments are subject to risk, including possible loss of principal invested.
Performance for the GPTC Pension Funds are net of the 1% annual fee and include the reinvestment of interest and dividends.
7700 Shawnee Mission Pkwy • Suite 101
Overland Park, KS 66202
Main: (913) 831-7999
Fax: (913) 831-0007
Toll Free: 1 (888) 529-2776
Info@GreatPlainsTrust.com
Florida Trust Service Office
Sarasota, FL
Main: (941) 373-1330
Will Lynch, CFA, CPA
Atlantic Region Service Office
Charlotte, NC
Main: (704) 552-3883
Grace Rathkamp Danello, CFA
Will Lynch, CFA, CPA
Vice Chairman
Steve Soden
President & CEO
Michael Sears, JD, CTFA
VP, Trust Officer/ Attorney
Jonathan Staton, JD, CTFA
Trust Attorney
Laurie Marchio
VP, Operations
REGIONAL ACCOUNT EXECUTIVES
Brad Culver, VP
(913) 647-1296
Brad@GreatPlainsTrust.com
Grace Rathkamp Danello, CFA
(704) 552-3885
Grace@GreatPlainsTrust.com
Nathan Soulis
(913) 647-1294
Nathan@GreatPlainsTrust.com
Ryan Thompson
(913) 647-1304
Ryan@GreatPlainsTrust.com
Dan Johnson
(913) 647-1305
Dan@GreatPlainsTrust.com
OPERATIONS
Joanna Briel
Senior Trust Accountant
Marsha Lampe
Senior Trust Accountant
Monica May
Senior Trust Accountant
Jenny Pope
Senior Trust Accountant
Angie Steinheider
Senior Trust Accountant
Alyssa Parker
Operations Assistant
Operations E-mail: TrustOps@GreatPlainsTrust.com
101 S. Reid Street • Suite 307
Sioux Falls, SD 57103
Main: (605) 271-5141
Andy Holmes
Andy@GreatPlainsTrustSD.com
Blake Burton
Systems Administrator
Shauna Newton
Marketing Coordinator
Selene Werkowitch, CPA
Controller