|
TRUST SERVICES
There are many kinds of trusts for many different purposes.
They all have one thing in common: they are a means to assuring
your property will be handled, and ultimately passed on, to those
beneficiaries of your choosing. Leaving property outright often
fails to achieve your objectives. Sometimes assets are dissipated
by inexperienced beneficiaries; sometimes passing to “in-laws” you
never cared about; and, sometimes results in the payment of
unnecessary death taxes and estate settlement cost when the
beneficiary dies.
A trust is created by the transfer of property to a trustee
that has the responsibility to manage the property under the terms
of a trust document for the benefit of beneficiaries. How can you
be sure the trustee will manage the trust property in the best
interests of the beneficiaries? By picking a trustee you can trust
to carry out your wishes.
A trust can provide financial protection for beneficiaries. A
trustee can provide the investment knowledge to wisely and
appropriately invest and manage the assets in the trust; counsel
against “get rich ideas” proposed by unscrupulous strangers or
naïve, but well meaning friends or relatives; and, guide and
direct an inexperienced beneficiary on the handling of significant
assets once the trust terminates.
Substantial savings in taxes can also be realized with well
thought out trust arrangements. A properly prepared trust can
contain assets that will avoid taxation in the surviving
beneficiary’s estate, even though the beneficiary receives all of
the income and access to the principal to maintain a comfortable
lifestyle. Despite the changes to federal estate taxation which
have freed thousands of estates from taxation, many thousands of
others still need to be concerned about estate taxes. Congress has
made several changes regarding federal estate tax laws that might
effect your situation. Contact us to find out more details.
Trusts Under Will - Your will provides the terms and
conditions of the trust. During your life, you continue to own and
control the assets. You can change your will as your assets and
family change. After your death, your trustee assumes the
responsibility for the proper management of your property for your
family’s benefit.
The trustee assumes the “headaches” of making investments,
filing tax returns, keeping books, collecting rent and contract
payments, and all of the other details of managing property. The
trustee can also help prevent a beneficiary from making an unwise
investment. A beneficiary can deflect the request by a friend or
relative for a “loan” or “can’t miss” investment simply by
referring the request to the trustee.
If the trust is for a surviving spouse or children, income tax
benefits can be achieved by distributing income within the family
unit where it will do the most good, but at the least income tax
cost. For example, income could be distributed to a grandchild for
college expense rather than to a parent or grandparent in a higher
income tax bracket.
Living Trusts - Typically, living trusts provide all of
the benefits of a trust under will, as well as others. The basic
difference is that a living trust is created and becomes
operational during your lifetime. These trusts are generally
revocable, which means that the terms of the trust can be changed
at any time prior to death. Many times the creator of the trust is
also the trustee and the beneficiary. At your death, the trust can
continue for the benefit of others (just as a trust under will
begin operation at that time), achieve the same tax benefits, and
at the same time minimize the costs of settling your estate. Other
advantages of a living trust include: you can “tryout” your
trustee during your life if you appoint another as trustee; living
trusts are generally more confidential.
Irrevocable Insurance Trusts - This type of trust is used to
provide liquidity at the time of death without having the
insurance proceeds included in the taxable estate of the insured.
Properly arranged, the gifts of cash by the insured to the trustee
to pay the insurance premiums are treated as a part of a $12,000
per year per person tax-free gift. This results in both the gifts
and the insurance proceeds being excluded from transfer taxes.
Second only to deciding you need a trust is deciding who should
be the trustee. A trustee needs to have a complete knowledge of
taxes, accounting, real estate, business administration and
investments. A trustee should be financially responsible. A
trustee must be impartial so that all of the beneficiaries are
treated in accordance with the terms of the trust. Being a trustee
is a full time job; therefore, a trustee needs to always be
available. At Iowa State Bank, we feel we meet all of these
standards. Our trust staff is experienced and trained in
administering all types of trust. We are responsible, and
impartial. It is our commitment to carry out the terms of each
trust we administer.
Additional Services - For those who want to take
advantage of our investment services without the formality of a
trust arrangement many people use an agency account. This is a
simple relationship where you hire us to manage your assets. A
preprinted agreement is signed which spells out our duties and
responsibilities. You deliver your securities to us and we manage
them based on your guidelines. The agreement can be terminated and
assets can be added or withdrawn at any time.
There are three basic arrangements available:
Custodial Account– We hold all assets, collect income
and provide you with accounting on a regular basis. Bills can be
paid and cash returned to you as you instruct. No investment
advice or management is provided.
Investment Advisory – This service provides all of the
services of a Custodial Account plus we will review your
investments and make recommendations to you. You have the final
say on investment decisions, but have the advantage of our
recommendations.
Investment Management – This service provides all of
the services of a Custodial Account plus active investment
management of the assets in the account. You establish the
investment guidelines and we take it from there.
|
