Because trusts and their benefits are often misunderstood, we get questions every day. To provide greater understanding of trusts, we are providing the following information in a question-and-answer format:
Q: Why clients choose to set up a trust?
A: Trusts offer flexible financial management that is not possible from other sorts of investment accounts. A trust can be a potent means of financial protection for
- oneself and one’s spouse, through sound investment management today and in the event of future incapacity
- family members and other heirs, who may eventually share an important financial resource
- charities, who will fulfill the donor’s philanthropic intentions
Q: Is it difficult to set up a trust?
A: No. To engage us as your trustee, you take two steps. First, you provide the money and/or securities that you wish to place in trust. Second, you give us your written instructions in the form of a trust agreement. The agreement, drawn up by your attorney, is signed by you (as creator of the trust) and by us (as trustee). That’s all there is to it.
Trusts of this type are often called living trusts to distinguish them from testamentary trusts (those established under the terms of a will). Living trusts created for the purpose of personal asset management are also known as revocable trusts. That’s because the person who creates the trust may cancel or revoke it.
Q: If I create a trust, may I keep control?
A: Certainly. Trust clients keep control in three ways:
- First, the trust agreement specifies that the client may make withdrawals (or additions) at any time.
- Second, the client reserves the right to cancel the trust.
- Third, the client reserves the right to give us new or different instructions by amending the trust agreement.
Q: May I make investment decisions?
A: If you wish. Most of our clients look to us for objective, unbiased portfolio supervision because they lack the time or specialized knowledge to do all the necessary investment homework themselves. However, you may delegate as much or as little investment responsibility as you wish. After all, it’s your trust. For example, you might spell out your goals and requirements in some detail, then leave the selection of specific investments to us as trustee.
Another alternative is to start out by asking us to submit each proposed investment change for your approval until you’re satisfied that we’re interpreting your requirements accurately.
Another option is to ask us to submit recommendations while you also research some opportunities.
Q: Are trust services expensive?
A: Our fees are competitive with those charged by investment advisory firms (for services that may not include custodianship of securities, record keeping, and other conveniences) or by mutual funds.
Q: Must I be wealthy to set up a trust?
A: If you think of millions of dollars when you hear the word “trust,” you may be pleasantly surprised when you learn more. Today’s trust institutions have developed ways to handle even relatively small trusts efficiently. In any case, we don’t think in terms of fixed minimums. Instead we ask ourselves, “Is a trust the best way to meet our client’s financial management needs?”
To find out whether a trust is right for you, please schedule an exploratory talk with a trust officer.
Q: What return can I expect for my investment?
A: That depends on your goals—a desire for current income, long-term growth to offset inflation, or some balance of the two—and on ever-changing investment conditions.
For the past 75 years, diversified portfolios of large-company stocks have produced a total annual return (dividends plus growth in principal value) averaging around 10 percent. Bonds have produced somewhat lower returns overall, but they offer a higher level of current income than stocks.*
As trustee, our goal is to provide reasonably consistent returns over the years. We emphasize careful asset allocation, the selection of quality investments, and constant vigilance.
Q: Can a trust be used to reduce taxes?
A: If they are properly structured, testamentary trusts can reduce or eliminate federal estate tax. A living trust has no inherent tax-saving features. However, you can arrange for your living trust to survive you and become irrevocable, thus sheltering part of the trust’s assets from later tax at a spouse’s death. If you and your spouse have a large or growing estate, this kind of planning may offer at tax-saving opportunity.
Q: Who should I name as trustee of my trust?
A: We believe that you should look for experience first. Look for an individual -- or a financial organization, such as our Wealth Resource Group -- who has handled every type of market for diverse sorts of families. You’ll need this experience in providing financial security for you and your family. Your trustee should have financial strength as well as professional investment capabilities. The trustee should participate in the financial markets every day and consider the trusteeship as a full-time job. That describes us perfectly.
Q: How may I learn more about trusts?
A: That’s easy. Our trust and investment pros will be glad to assemble further information for you, analyze your investment requirements, and answer your questions. Please call on us.
NOT A DEPOSIT
NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NOT GUARANTEED BY THE BANK
MAY GO DOWN IN VALUE
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