Trust & Investment Services
Acquiring wealth is one thing; conserving it is another. Financial markets gyrate; the economy swings unpredictably; politics and international relations intrude upon daily life as never before; family financial needs evolve in unexpected ways.
Because you can’t know the future, you need a plan and a partner to meet it with confidence, come what may. That plan should include trust services, and we should be your partner. With our professional guidance, we can bring an added measure of financial peace of mind to you and your family.
This guide provides you with an introduction to the services that we offer and the potential benefits for you. These are but generalities – trusts are individually tailored to meet each family’s unique needs. Please call upon us at your earliest convenience to learn more.
Contents
- Goals, Strategies, and Tactics
- A Trust Planning Sampler
- Investment Management Account
- Living Trust
- Standby Trust
- Retirement Planning and IRA Rollovers
- Trusts for Children
- Special Needs Trusts
- Charitable Trusts
- Trust in Your Will
- How a Tax-Saving Trust Can Keep More in the Family
- Estate Settlement
Goals, Strategies, and Tactics
Are you confident that your wealth is well managed? Many affluent individuals lose track of where they stand and where they’re going. They either underestimate their resources or fail to make full use of them. Opportunities remain unexplored and risks go unrecognized.
Financial planning and wealth management assistance are an integral part of our emphasis on helping families derive all possible benefit from their financial resources, now and through the years to come. Where will and trust revisions or other legal matters are involved, our representatives work in close consultation with each client’s own attorney and other professionals.
Among the questions that might come up in the initial planning session are:
- Are you satisfied with your financial preparations for retirement?
- Does your investment portfolio suitably balance income, growth opportunities, and risk?
- Do you own special assets, such as a closely held business or investment real estate, which require special estate planning measures?
- Does your long-range property planning take advantage of current opportunities to reduce the impact of federal estate taxes?
- Will your beneficiaries gain full benefit from the resources that you can provide?
Here are brief examples of how our trust and investment services can be marshaled to meet your financial goals. Additional details follow.
Investment Management Account
Goal: Full-time supervision for your securities
When you open an Investment Management Account with us, we draw upon our sources of research and analysis to manage your money. We become your institutional investor.
We begin by developing with you an asset allocation plan for your investments. Investment portfolios need to be diversified among asset classes to weather inevitable financial market storms; we can do that. Your objectives for your account, your income requirements and tax status, and your personal attitudes as an investor must be understood and integrated into the planning process; we will do that too.
We can’t make down markets change direction, but over the years we have helped our clients to manage their assets so as to meet every sort of market challenge and opportunity.
The buy and sell decisions that we make for your account – or, if you prefer, the recommendations submitted for your approval – represent our independent judgment of the best course of action for your portfolio, given your objectives, risk tolerance, and the market outlook.
To open an account, you sign a simple agreement designating us as your agent and deliver the assets that you wish us to manage. You continue to own your securities, and you may add or withdraw funds to terminate your account at any time.
Living Trust
Goal: Now and future management for family funds
Similar in its immediate benefits to an Investment Management Account, a revocable living trust offers added long-range planning advantages.
When we act as your trustee rather than merely as your agent, you may arrange to have us take on broad responsibilities for managing your financial affairs. From a practical standpoint, each trust client has just as much investment control as he or she wishes. Typically, we provide professional management or investment guidance tailored to each client’s needs and preferences. Some of our clients start off by managing their trust investments themselves, reserving the right to delegate investment responsibility to us in the future.
Our role is clear. We follow the client’s instructions, as set forth in the written trust agreement, consistent with all applicable laws and fiduciary control. Any client who becomes dissatisfied with our services is free to terminate the trust or change trustees.
Beyond control over the trust, our clients gain better control over their lives – a type of control that only a trust affords.
In case of incapacity. No one can escape the risk of an incapacitating illness or injury. When that occurs, others necessarily must take control of your finances. A living trust can allow the trustee to act on your behalf. The trust agreement can spell out the ground rules – how you want things handled. Without a trust, a court decides who takes over in the event of incapacity. And then the ground rules are set forth in the law.
Revocable living trusts make a highly adaptable framework for long-range family security planning. Any trust provisions that might be made for your family by your will can be made through a living trust. However, unlike a will, a living trust agreement normally does not go on public record at a person’s death. Family privacy is preserved.
| Quick comparison | ||
| Which of our two money-management services is better for you? The answer depends on whether you simply want current investment supervision or seek long-term family protection as well. | ||
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| Investment Management Account | Living Trust |
| Professional, full-time supervision for your invested funds | Yes | Yes |
| We act on your behalf or submit recommendations for your approval, as you prefer | Yes | Yes |
| Collection of income, recordkeeping, and periodic reports | Yes | Yes |
| Freedom to change your instructions or cancel the service | Yes | Yes |
| Future self-protection, making it possible for us to use income and principal for your benefit, pay bills, and attend to other financial matters in the event of your incapacity | No | Yes |
| Continuity of service for the benefit of others following your death, without “probate” delays | No | Yes |
| Reduction in expenses relating to settlement of your estate | No | Yes |
| Opportunity to save estate taxes at death of surviving spouse or other beneficiaries you have named | No | Yes |
Standby Trust
Tactic: Trust convenience and protection on a “ready when needed” basis
You may establish a living trust to fit just about any personal requirements. Suppose you enjoy doing your own investment homework now but foresee the day when you might become disabled, wish more freedom to travel, or simply decide to take life easier. You should consider having a standby trust. We will stand ready to manage your money for you (or for your spouse or other beneficiaries in the event of your death, including tax-saving provisions, if desired). Meanwhile, you retain complete control of your assets, with complete freedom to keep on handling your own financial affairs.
Retirement Planning and IRA Rollovers
Goals: Tax deferral and careful investment management of your retirement capital
At retirement the habits of accumulation, honed over a lifetime, must change. Retirement is when one begins to live on investment income and, perhaps, on principal as well. That may entail a gradual change in investment strategy. As we counsel those approaching retirement, we generally cover these themes:
- Hang on to your long-term perspective. Your retirement may last for 20 or 30 years, perhaps even longer. During that time inflation is bound to be a problem from time to time. To reflect that fact, your portfolio should continue to incorporate growth elements.
- Balance your risks. Investors learned all too well in recent years that markets can go down as well as up. Careful diversification among and within asset classes can reduce an investor’s overall risk exposure.
- Pay attention to taxes. Are you managing your investments in a tax-efficient manner? Are you taking advantage of the low tax rates applied to most corporate dividends? In your tax bracket, do tax-free municipal bonds make sense? These are just a few of the questions that retirees need to wrestle with, and we can help.
IRA rollovers. If you will be receiving a lump sum distribution from a 401(k) plan or other employer-provided qualified retirement plan, you have some important tax planning ahead. You can defer income taxes, often for many years or even decades, by rolling the lump sum into an IRA.
Most retirees will find an IRA rollover to be to their financial advantage. Should you decide to take this approach, arrange for a trustee-to-trustee transfer to avoid the 20% withholding tax that otherwise applies to lump sum distributions.
Trusts for Children
Goal: Give the next generation a solid financial foundation
To paraphrase a well-known investor, a child’s inheritance should make it possible for him or her to do anything in life, but not to do nothing. To that end, many parents and grandparents have found that thoughtfully designed trust can flexibly provide an important measure of financial security.
Gifts-to-minors trusts. For children who are minors, contributions of up to $11,000 per year to this account will avoid gift taxes. A married couple may together set aside $22,000 each year for each child, so in a few years a significant source of capital may be built up. Assets may be used for any purpose, including education funding, and must pass to the child when he or she reaches age 21.
Inheritance protection trusts. An inheritance might need protection from any number of dangers. Simple financial immaturity and lack of investment experience, for example. The temptations of luxurious living. Addictions. Attacks by scam artists. Well-intentioned but poorly planned business ventures. Claims by creditors, notably ex-spouses.
An inheritance trust provides a barrier to financial misjudgment, even as it delivers professional investment management of assets. The trust should be drafted to suit the specific family circumstances. Incentives may be included to provide positive reinforcement to the beneficiary. The trust principal may be distributed to the beneficiary at other time on the planned schedule (so much at age 25, age 35, age 45 and so on) or upon the occurrence of specified events (completion of education, marriage, or the beginning of the professional practice, for example). Or these distribution decisions can be left to the discretion of the trustee. A trust may transform an inheritance into a lifetime resource for financial security.
Special Needs Trusts
Strategy: Lifetime supplement for someone with a disability
Over the past several decades in America, we’ve made tremendous strides in helping disabled, or “special needs,” individuals. Segregation and isolation are giving way to supervised group living and mainstreaming.
As welcome as such developments are, they represent an incomplete solution for most families. Caring for those with special needs is an expensive and lifelong proposition. Parents wonder whether they have the financial resources for a special needs child, especially for the time after the parents’ death.
There are planning strategies that can help provide supplemental financial support for a disabled person, without jeopardizing qualification for government assistance. When trusts are created for this purpose, they need to be drafted and administered in accord with government guidelines. Such trusts can provide for a variety of vocational and recreational services, supporting the individual’s dignity and improving his or her quality of life.
When Special Needs Trusts are administered by a corporate trustee, such as us, the assets receive professional management and the beneficiary receives continuous financial protection.
Charitable Trusts
Goal: Philanthropy and family financial protection are not conflicting objectives
Charitable trusts have long been an important part of estate planning. With trusts the benefit of owning securities or other assets can be split into two parts, present and future:
- One or more income beneficiaries can be given the immediate benefit of ownership in the form of periodic payments from the trust. These income payments can last for a specified number of years or for the beneficiary’s lifetime.
- One or more “remainder beneficiaries” can receive the income-producing assets in the future, when the required income payments have been completed.
Both the right to receive trust income and the right to receive a trust’s “remainder interest” can be valued for the purpose of granting income tax deductions, and also for the purpose of figuring gift or estate taxes.
There are many possible variations of charitable trusts, each with important income, gift, estate, and generation-skipping transfer tax consequences. The key to using today’s charitable trusts successfully is to design an approach tailored to your own particular set of charitable intentions and family financial planning objectives.
Example: The Changing Face of Death Taxes
Estate and inheritance taxes are, for most people, a confusing and difficult subject. Unfortunately, confusion may be compounded in the coming years as a variety of changes are phased in. As the table below indicates, the amount exempt from federal estate tax will grow, as the top estate tax falls. In 2010, under current law, there will be no federal estate tax, but in 2011 we will return to the exemptions and tax rates of the last century.
At the same time, interaction of state death taxes (estate taxes, inheritance taxes, or both) with the federal system has changed, as the credit for state death taxes has been converted to a deduction. Some states have “de-linked” their death taxes from the federal estate tax model. Such changes can have important and unpredictable impact upon estate and trust documents.
Finally, current law calls for the repeal of basis “step-up” at death in 2010, which, in effect, substitutes a tax on capital gains for the federal estate tax. Taken together, these changes suggest that affluent families need to keep a careful eye on their estate plans and tax developments in the coming years.
| Year | Top estate tax rate | Federal exempt amount |
| 2005 | 47% | $1.5 million |
| 2006 | 46% | $2.0 million |
| 2007 | 45% | $2.0 million |
| 2008 | 45% | $2.0 million |
| 2009 | 45% | $3.5 million |
| 2010 | Federal estate tax suspended; carryover basis implemented. | |
| 2011 | 55% | $1.0 million |
Trust in Your Will
Strategy: Provide beneficiaries more than a simple bequest
By leaving all or portions of your estate in trust, your will can add to your family’s financial security and peace of mind.
A trust for your spouse, if you’re married, can provided generous support if he or she survives you. What’s more, trusts frequently reduce overall federal estate taxes for husband and wife by reducing the tax exposure at the survivor’s death. When compared with the tax consequences if the first to die leaves a will with no trust, the savings can be substantial.
When children or other beneficiaries are young or financially inexperienced, the need for a trust is clear. But your will’s trust provisions need to be rigid. Trusts are appropriate whenever you want to leave someone the benefits of property without the burdens of its management.
A beneficiary need not be limited to the income from a trust fund. You can give the trustee discretion to draw on the fund itself in order to pay for a child’s education or maintain your spouse’s accustomed standard of living. Because we keep in close continuing contact with the families that we serve, you know that these discretionary powers will be exercised with understanding.
Example: How a Tax-Saving Trust Can Keep More Wealth in the Family
Although the amount exempt from federal estate tax is growing, married couples can secure even greater tax freedom with trust planning. This table contrasts the costliness of a married person’s will or trust that leaves everything to a surviving spouse outright with the savings possible with a trust. The savings are the same for a “standard” marital deduction trust or a Qualified Terminable Interest Property (QTIP) trust.
We’ve assumed that one spouse dies in 2005 and the survivor lives until 2011 or later, when the amount exempt from federal tax falls back to $1 million. State death taxes and the effects of inflation are not taken into account in the table.
| Estimated federal estate taxes for husband and wife | |||
| All to spouse outright | Part to spouse with tax-saving trust | ||
| Estate | Total tax | Total tax | Tax savings |
| $2,500,000 | $680,000 | $0 | $680,000 |
| $3,000,000 | $945,000 | $210,000 | $735,000 |
| $4,000,000 | $1,495,000 | $680,000 | $815,000 |
| $5,000,000 | $2,045,000 | $1,220,000 | $825,000 |
| $10,000,000 | $4,795,000 | $3,970,000 | $825,000 |
Estate Settlement
Tactic: The right executor is a key to a successful estate
Everyone who owns property needs a will. If a valid will is lacking, a probate estate must be distributed according to the unbending laws of intestacy – a distribution that may bear little relationship to actual family needs or desires.
Unfortunately, many individuals leave an unrecognized weak point in their wills: Spouses, relatives or business associates are designated to fill what is presumably the mostly “honorary” post of executor or personal representative.
In reality, estate settlement involves a demanding, complex set of tasks – and the results, for better or worse, depend upon the experience, skills, and judgment of those you designate to handle the job.
The executor or personal representative you name in your will is responsible for safeguarding the assets of your estate, for paying proper debts, for contesting improper claims, for collecting sums owed the estate, and for filing estate and income tax returns. Your executor must decide what and when to sell to pay taxes and estate expenses and what to hold for distribution to your beneficiaries or to trusts that you establish for their benefit.
In less complicated times, people relied on close relatives or friends to settle their estates. Today, naming an inexperienced executor is not only shortsighted but also potentially costly. The characteristics of an ideal executor or personal representative include:
- Financial responsibility.
- Unquestioned integrity and freedom from personal bias.
- Patience and sympathy.
- Experience in caring for all types of assets and holdings.
- Informed investment judgment.
- Familiarity with special tax questions that arise when an estate is settled.
- Immortality. (What if your executor dies before you do, or before completing the settlement of your estate?)
We provide specialized skills in all phases of estate administration. As your executor, we’re sure to be on hand when needed, and no relative or family friend could hope to match our experience and facilities. Yet our fees for estate settlement are no greater than inexperienced individuals might be entitled to receive.
Invitation
You can look to us for a full range of money-management skills and facilities. And you will find an emphasis on responsive, personal service that is rare in today’s business world.
We cordially invite you to become better acquainted with us and our work. If you prefer to have one of our financial professionals meet with you at your home or office, simply phone or write us to arrange an appointment.
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