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The Ten Most-Asked Questions About Trusts
- Must I have a trust to use your investment services?
Many of our clients choose trust arrangements because of the unique
advantages they offer. But no, you’re not required to create a trust.
If you prefer, you can put us to work on a less formal basis. All it
takes is a simple letter of instructions, designating us to act as
your investment agent.
- What are the advantages of a trust?
With a trust you can not only draw on our broad investment
capabilities but also arrange to have us perform any number of special
services, now or in the future. These personalized services could
range from making payments of estimated taxes while you’re traveling
abroad to providing full personal financial management in the event
you suffer an incapacitating illness.
Also, you can name one or more beneficiaries to receive the assets of
your trust at your death. These distributions avoid probate. Or, you
can have your trust continue beyond your lifetime, serving as a source
of continuing income and support for your spouse, a child or others
whom you designate.
- Is it difficult to set up a trust?
No. To put us to work as your trustee, you take two steps. You deliver
the money and/or securities that you wish to place in trust. And 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 reserves the right to cancel or revoke
it.
- If I create a trust, can I keep control?
Certainly. Usually our trust clients keep control in three ways:
First, the trust agreement specifies that they may make withdrawals
(or additions) at any time.
Second, as just mentioned, they reserve the right to cancel the trust.
Third, they reserve the right to give us new or different instructions
by amending the trust agreement.
- Can I make the investment decisions?
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. But
you can delegate as much or as little investment responsibility as you
want. 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.
Or you might 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.
Or you might ask us to submit recommendations while also researching
some opportunities on your own.
Or . . . . But by now you have the picture. With a trust, you make the
rules.
- Is trust service expensive?
No. Our fees are competitive with those charged by investment advisory
firms (for services that may not include custodianship of securities,
recordkeeping and other conveniences) or by mutual funds.
- How big must a trust fund be?
If you think of millions of dollars when you hear the word “trust,”
you’re the victim of a widespread misconception. 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
this person’s financial management needs?”
To find out whether a trust would be right for you, schedule an
exploratory talk with a trust officer.
- How much of a return will I get on My money?
That depends on your goals—current income, long-term growth to offset
inflation, or some balance of the two—and on ever-changing investment
conditions.
Over roughly the past 75 years, diversified portfolios of good-quality
stocks have produced a total annual return (dividends plus growth in
principal value) averaging around 11%. 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.
- Are trust funds insured by the FDIC?
Primarily, trust funds are invested in stocks, bonds or other
income-producing assets. These trust investments are not bank
deposits. Securities and other assets administered by a bank as
trustee are held separate from the bank’s own assets, under strict
audit controls, and cannot be reached by the bank’s creditors.
Therefore, the need for FDIC insurance is generally limited to
uninvested trust cash, such as income awaiting distribution. Under
FDIC regulations, uninvested funds held or deposited by the bank as
trustee for a revocable trust are insured together with other deposits
of the trust’s owner, up to a total of $100,000.
- How can I find out more about trusts?
That’s easy. Our trust and investment pros will be glad to assemble
further information for you, analyze your investment requirements and
answer questions not covered here. Please
e-mail us or call our Asset
Management and Trust Department at (916) 325-0050.
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