The "ABCs" of trust services
The “ABCs” of trust services
Trusts are not as mysterious as most people seem
to think, and technological advances have made
trust-based financial planning accessible to more
and more families. That’s one reason why discussions of
trusts seem to be popping up in the popular press more
The ABCs of a trust arrangement are not hard to follow:
A. You, the grantor, or donor, transfer money and/or
property to the care of a trustee.
B. The trustee takes legal title to the money or property but receives none of the privileges
or benefits of ownership.
C. The trustee is required to invest, manage and distribute
the trust assets for the beneficiaries
whom you name, according to your instructions. You and your attorney spell out
those instructions in a formal trust agreement—
or, if you’re leaving your assets in what’s known as a testamentary trust, in
your Last Will and Testament.
A trust can do almost anything that you want it to.
Perhaps that’s what makes trusts so mystifying to most
people. There’s no such thing as a “typical trust.”
What trusts can accomplish
The most important thing that a trust does is make financial
resources available to beneficiaries when needed.
When a corporate fiduciary, such as us, is trustee, another
automatic benefit is professional investment management.
But that is just the start of potential benefits.
Among the other objectives that trusts may target:
• income tax savings;
• estate tax savings;
• gift tax savings;
• creditor protection;
• probate avoidance;
• implementation of philanthropic initiatives;
• education funding.
21st century trust planning
Trust planning has been getting much more attention from state legislators around the country in recent years.
Trusts, A through D
Assets. Usually stocks,
bonds, mutual funds or other
financial instruments, though
any sort of property may be
placed in a trust.
Beneficiaries. You may be
the beneficiary of your living
trust, and you may designate
simultaneous or successor
Corporate trustee. That’s
us. We’ll manage assets and
administer the trust.
Directions. Each trust tells
the trustee what its purposes
are, and how income and principal
are intended to be divided
among the beneficiaries.
Sense Money Spring 2014
© 2014 M.A. Co. All rights reserved.
Among the more significant changes:
• Uniform Prudent Investor Acts revise the standards
for evaluating the investment performance of trustees.
Traditionally, trust investing has been marked
by conservative approaches, including evaluating the
appropriateness of each individual trust investment.
The new laws look at the trust assets as a whole, using
principles of modern portfolio theory to evaluate the
suitability of the investment plan. These acts also guide
development of “total return trusts,” which may depart
from traditional notions of trust income and principal.
• Uniform Trust Codes codify the rights and responsibilities
of the parties to trust-based plans. The new
Codes also may ease the process of correcting trusts
that otherwise are not amendable, including division
of one trust into several trusts or the combination of
several trusts into a single one to reduce administrative
costs and increase investment flexibility.
• Easing or elimination of “rules against perpetuities”
in some states allows private trusts to last for many
generations. Traditionally, only charitable trusts were
permitted to have an unlimited life. A longer-lasting
trust has the potential to avoid the imposition of future
estate, inheritance and gift taxes on the family fortune.
“ABCs”. . . continued
Trusts have had a reputation for stuffiness and rigidity.
The bottom line of recent legislative initiatives is even
greater flexibility for this powerful wealth management tool.
Work with the right trustee
The most important factor affecting the success of any
trust arrangement is the choice of trustee to implement
the plan. This is a core part of our business. We are a
“corporate fiduciary.” That phrase means that we are a
business organization that is permitted, under the law,
to serve as trustee and administer investment programs
for individuals, families, businesses and endowments.
For this service we are compensated by reasonable
annual fees, tied to the market value of the funds in our
care. Our operations are subject to a variety of internal
and external audits and oversight.
Most importantly, we enthusiastically accept and operate
under a code of fiduciary responsibility. That means
we must, by law, put the interests of our customers ahead
of our own.
For more information about how trusts may help you
to make the most of what you own, please schedule a free
consultation with one of our officers.