Trust Relationship Manager Manual

Transcription

1 Trust Relationship Manager Manual

2 National Advisors Trust Company SAFETY AND SOUNDNESS OVERVIEW National Advisors Trust is regulated by both the Office of Thrift Supervision ( OTS ) and the F.D.I.C. As a financial institution with over $1 billion in assets, National Advisors Trust is required to have an on site safety and soundness examination by the OTS at least every 18 months. The examination covers all areas of the financial institution and its Holding Company, including the qualifications of its senior officers and directors, the effectiveness of board oversight, and the institution s compliance with federal laws and regulations. The OTS may conduct interim examinations at any time. In addition to the governmental regulatory examinations, the National Advisors board of directors employs CBIZ Mayer Hoffman McCann ( CBIZ ) as independent auditors. CBIZ performs a full financial audit of the Holding Company and the Trust Company as of December 31 annually. The trust company is also required to annually conduct an independent audit of its compliance with provisions of the Bank Secrecy Act, USA Patriot Act, Office of Foreign Assets Control, Financial Crimes Enforcement Network, and regulations on Politically Exposed Persons. The BSA audit covers the trust company s policies, procedures, compliance records, and training of all employees. The National Advisors board of directors annually contracts with CBIZ to conduct an independent Director s Exam of the trust company. This is a compliance audit of our policies and procedures regarding the administration and custody of our fiduciary accounts. Testing includes reconcilement of the trust company s trust accounting system asset position statements against asset position reports from each of the trust company s sub custodians and with its cash depository bank. CBIZ also annually produces a SAS 70 Type II audit to determine the effectiveness of the trust company s internal policies, information technology systems and operational/management controls. Every calendar quarter, Contineo Technologies conducts remote intrusion testing of the trust company s network firewalls. Contineo also annually performs an audit on the effectiveness of the trust company s information technology policies, system controls, system access and change logs, and business continuity systems. National Advisors 2

3 Trust conducts remote site system recovery exercises using SunGard Recovery Services facilities, including SunGard s remote communications and server hardware. The results of all of the trust company s examinations and audits are reported directly to its board of directors. In short, National Advisors Trust is thoroughly examined and audited. By regulation, National Advisors Trust is required to maintain error and omissions insurance and a blanket fidelity bond on its fiduciary activities. Its sub custodians at Fidelity and Bank of New York (BONY) provide separate insurance on the custody of the trust company s client account assets under their control. The trust company s securities position at Fidelity is backed by Fidelity s capital and National Advisors account is additionally insured to full market value by CAPCO, a New York insurance company, plus SIPC insurance on Fidelity s broker dealer activity. The positions at BONY are held in nominee name for National Advisors Trust. The trust company s nominee positions at BONY are not included in BONY s capital account, so in the event of BONY s insolvency, any position in nominee name are simply transferred by the F.D.I.C to a qualified successor sub custodian. This transfer normally occurs quickly. National Advisors Trust s position at BONY is backed by BONY s extensive capital and several major insurance carriers. The Fidelity sub custody positions are somewhat more complicated. Mutual fund positions, which represent the largest portion of the trust company s assets at Fidelity, are held by Fidelity in nominee registration with the respective fund companies. These mutual fund positions are segregated from Fidelity s capital. Stock, bond, and similar asset holdings at Fidelity are in street name. In the unlikely event of Fidelity s insolvency, the nominee registration positions are readily transferable to another sub custodian of the trust company s choosing. The street name securities would be subject to the control of a bankruptcy trustee. As client asset are segregated from the capital account by the trustee, they become transferable from the bankruptcy estate. SIPC and CAPCO insurance guarantee the full value of client account assets held by Fidelity, whether in street name or otherwise. National Advisors Trust money market positions are generally held in direct nominee registration with the individual sponsoring fund companies. The mutual fund groups, 3

4 and their institutional custodians, maintain varying amounts of insurance on their client assets held for investment. Cash positions pending investment or distribution are held at UMB Bank N.A. These are protected by UMB s capital, the F.D.I.C. and substantial additional insurance on the trust company s deposit accounts. Please know that the safety of client assets is always of great concern to National Advisors Trust board, its staff, and its shareholders. The various examinations, audits, and insurance layers are designed to protect these accounts to the fullest extent reasonably possible. Should National Advisors Trust Company s regulators ever determine that the trust company is operating in an unsafe manner or should it maintain insufficient capital; the F.D.I.C would quickly seize control of the institution, including the trust company s client assets and account records. As these assets and records are already segregated from the trust company s corporate accounts, the client assets would be quickly transferred to a successor bank, usually within days. All clients would be free to continue services with the successor, or could transfer accounts to other institution of their choice. 4

5 TRUST OVERVIEW National Advisor Trust is a federally chartered trust company with services available in all 50 states. National Advisors Trust provides high quality trust administration services while protecting the Trust Relationship Manager s role as the relationship manager in the client relationship. Continuity, impartiality, and consistency are benefits National Advisors Trust brings to the relationship. With INVEST Trust Services, a Trust Representative Office of National Advisor Trust Company, the Trust Relationship Manager is the key link between the client and the trust company. The Trust Relationship Manager manages the relationship with the client and receives compensation for his/her services to the trust beneficiary. The professionals at FiPar Private Label Trust Services will show you how to use trust strategies to retain assets, gather new assets and create relationships spanning several generations. ABOUT NATIONAL ADVISORS TRUST National Advisors Trust Company, FSB is regulated by the Office of Thrift Supervision (OTS) and was chartered in National Advisors Trust is a federal savings bank; however, it does not accept deposits, make loans, or markets its services directly to the public. National Advisors Trust understands and respects the relationship the Trust Relationship Manager has with the client and is committed to delivering excellent trust administration services. WHY TRUST SERVICES? The first reason is Asset Retention. Fundamentally, trust services retain assets two different ways. First by offering clients increased (extended) control over their assets, even spanning generations and secondly through the reduction of income and estate taxes. In addition, clients also use trusts for increase security, stability, continuity, and improved organization of finances. The second reason is Demographics. The majority of trust prospects seek trust solutions in the 10 year window surrounding their retirement. The demand for trust services will continue to grow as the Baby Boomers approach retirement age. 5

6 WHAT IS A TRUST? A trust is an arrangement in which one party (trustee) manages and is responsible for assets to be used for the benefit of another party (beneficiary). It is a contract that governs how assets are to be managed and sets the conditions that determine when cash or assets may be distributed from the trust. The person who receives cash or assets from a trust is known as the beneficiary. TYPES OF PERSONAL TRUSTS National Advisors Trust administers all types of trusts and has a full range of services available for: REVOCABLE TRUST ( Living Trust ) A Revocable Trust is so named because an individual creating the trust (the Grantor ) can revoke (i.e., change or cancel) it at any time. It is also called a Living Trust because it allows the Grantor to enjoy the benefits of a trust while the Grantor is still living. A Revocable Trust provides flexibility. It allows the Grantor to keep control over the trust assets while the Grantor is alive and maximizes the amount of the Grantor s property that will benefit the Grantor s family (or other beneficiaries) after the Grantor s death. Because assets properly transferred to the Grantor s Living Trust during the Grantor s life will, upon the Grantor s death, avoid the costs, expenses and delays involved with the probate process, a Living Trust can result in more of the Grantor s assets being available for the Grantor s beneficiaries sooner, at a significantly lesser cost. The Grantor may change the terms of the trust or even cancel it, as long as the trust agreement allows the Grantor to do so. IRREVOCABLE TRUST An Irrevocable Trust is an inflexible, fixed trust. The Grantor cannot change or cancel it once it has been signed. Despite this inflexibility, an Irrevocable Trust may be the right choice for many people because it can be used to make gifts to family members in order to help reduce taxes due on an estate at death. MARITAL TRUST A Marital Trust typically would be created on your death under the terms of the Grantor s Living Trust. The trust is designed to benefit the surviving spouse and minimize estate taxes. To achieve the tax benefits, the income from the trust must be paid to the surviving spouse after the Grantor s death. The surviving spouse may have the right to withdraw part or all of the property, and the trustee may be given the discretion to distribute trust principal to the surviving spouse for certain purposes (e.g., 6

7 maintenance, education, support and health MESH ). The surviving spouse would have the right to designate how and to whom the property in the Marital Trust would be distributed upon the death of the Grantor. QUALIFIED TERMINABLE INTEREST PROPERTY ( QTIP ) MARITAL TRUST a QTIP provision in a Marital Trust typically would be created on the death of the Grantor under the terms of the Grantor s Living Trust. This trust is designed to benefit a surviving spouse and minimize estate taxes and possibly Generation Skipping Transfer Taxes. To achieve the tax benefits, the surviving spouse must receive the income from the trust. In addition, the trustee may be given discretion to distribute principal to the surviving spouse for certain purposes (e.g., MESH). The major difference between the Marital QTIP Trust and the Marital Trust described above is that the Grantor not the surviving spouse would determine how and to whom the trust property is to be distributed on the surviving spouse s death. For this reason, QTIP provisions in a Marital Trust are often used in second marriage situations. BYPASS TRUST (also known as CREDIT SHELTER TRUST, FAMILY TRUST, OR NON MARITAL TRUST) This type of trust would typically be established upon the Grantor s death under the terms of the Grantor s Living Trust. It is designed to take advantage of the amount that each individual can give away (during life or at death) without incurring gift or estate taxes. If properly structured, the trust would not be subject to estate taxes in the Grantor s estate or in the estate of the surviving beneficiary spouse. Thus, the trust property can pass to the Grantors children or other beneficiaries free of estate taxes. The trust usually is structured so the surviving spouse can receive income and principal from the trust. In 2004, the amount that could be given without incurring gift or estate taxes was $1.5 million and is $3.5 million in IRREVOCABLE LIFE INSURANCE TRUST ( ILIT ) (also known as a Crummey Trust) An ILIT is an Irrevocable Trust that owns one or more life insurance policies. If this type of trust owns insurance policies on the Grantor s life, the proceeds payable on the Grantor s death generally should not be included in the Grantor s estate for estate tax purposes. This type of trust is commonly used by business owners to provide liquid funds necessary to pay estate taxes. Or for individuals who want to provide liquidity to pay estate taxes that may be incurred at the time of the Grantor s death. ILITs are also used to provide an inheritance to the Grantor s beneficiary in cases where the Grantor has bequeathed the bulk of his estate to a charitable organization. 7

8 CHARITABLE REMAINDER TRUST A Charitable Remainder Trust is a special type of Irrevocable Trust that may allow the Grantor to receive income tax deductions during the Grantor s life, get income from the trust for life or for a number of years, and give the balance to a charity on the Grantor s death. This type of trust is used to benefit charities while providing income, gift and estate tax savings. CHARITABLE LEAD TRUST A Charitable Lead Trust is an Irrevocable Trust for a fixed term of years or a life. During the term of the trust, a charity is the beneficiary. Upon termination of the trust, the remainder or principal is given to non charitable beneficiaries, such as members of the Grantor s family. This type of trust is used to benefit charities and also may provide income, gift and estate tax benefits. CHARITABLE TRUST OR PRIVATE FOUNDATION This Irrevocable Trust benefits one or more charitable organizations. By establishing a Charitable Trust or Private Foundation, an individual may minimize income, gift and estate taxes. GENERATION SKIPPING TRUST A Generation Skipping Trust has as its remainder beneficiaries persons who belong to a generation that is at least two generations after the Grantor. For example, a trust that would benefit the Grantor s child during the child s life and provide that, upon the child s death, the assets are to be distributed free of trust to the Grantor s grandchild, is a Generation Skipping Trust. Because the child does not receive the trust assets free of the trust, the child s generation has been skipped. SPECIAL NEEDS TRUST A Special Needs Trust is created to ensure that beneficiaries who are disabled or mentally ill can enjoy the use of property which is intended to be held for their benefit. In addition to personal planning reasons for such a trust (the person may lack the mental capacity to handle their financial affairs) there may be fiscal advantages to the use of this type of trust. Such trusts may also avoid beneficiaries losing access to essential government benefits. Special Needs Trusts can provide benefits to, and protect the assets of, the physically disabled or the mentally disabled. Special Needs Trust are frequently used to receive an inheritance or personal injury settlement proceeds on behalf of a disabled person or are founded from the proceeds of compensation for criminal injuries, litigation or insurance settlements. 8

9 DYNASTY TRUST A Dynasty Trust is designed to remain in existence and benefit multiple generations of a family. In some states, the trust must terminate at some point. In other states, such as South Dakota and Delaware, the trust may remain in existence forever. A Dynasty Trust is a great way to preserve asset for future generations. 9

10 ROLES OF THE BENEFICIARY, TRUSTEE AND TRUST RELATIONSHIP MANAGER The Beneficiary A beneficiary should schedule regular meetings with the Trust Relationship Manager so that both are aware of any changes in the beneficiary s circumstances. Some key points for the beneficiary to discuss with the Trust Relationship Manger are: The income needs of the beneficiary. The investment considerations which affect the beneficiary. The overall objectives of the beneficiary Ways that the relationship with National Advisors Trust and Curian Asset Management can work to benefit everyone. The Trustee National Advisors Trust s goal is to perform the administrative duties of a fiduciary in a timely, professional and empathetic manner. National Advisors Trust will have a working knowledge of all administrative matters pertaining to the trust including statements, tax reporting, distribution, administrative provisions and the overall management of your trust. The Trust Relationship Manager The Trust Relationship Manager remains the focal point link between National Advisors Trust and the beneficiary client. As the liaison between the beneficiary and National Advisors Trust, the Trust Relationship Manager facilitates the needs of the trust beneficiary and ensuring quality communication. The Trust Relationship Manager receives professional assistance from a dedicated and highly experienced trust staff. Roles Appointment of Investment Management National Advisors Trust s role in the trust relationship is to provide custody and administrative trustee services in accordance with the terms of the Trust. National Advisors Trust has appointed Curian Asset Management as its Investment Management agent for all INVEST Trust Services accounts. Curian Asset Management s role is to provide investment management in accordance with the terms of the Trust, applicable law, and the trust company s investment policies and procedures. 10

11 TRUST SERVICES MAXIMIZING CLIENT BENEFITS BENEFITS Benefit Maintain the Client Relationship. Maintain multi generation relationship with the client s family post death of the client. Benefit New Business Opportunity. Transfer of irrevocable trusts from other corporate Trustees Benefit Client Accommodation. Client has confidence and trust in his/her Trust Relationship Manger and wants the Trust Relationship Manager to be a trustee, but client s state of domicile has restrictive trustee requirements, or the advisor has liability or regulatory concerns about accepting the appointment. This difficulty is resolved by client naming National Advisors Trust as Trustee. Benefit Exit Strategy from Existing Trustee Appointments. Non corporate trustees may not be qualified to perform proper trust administration and record keeping as required by fiduciary law. They may also be uncomfortable serving as the trustee for family members. A solution is for the current trustee to resign as trustee, name National Advisors Trust as successor trustee. TRUSTEE SERVICES Once the trust is established, the assets are managed by the Advisor Firm, according to the investment policy statement defined in the terms of the document for the benefit of all beneficiaries. Continuity, impartiality between beneficiaries, and consistency are benefits National Advisors Trust Company brings to the relationship. Additionally, the trustee, is responsible for providing a permanent record of all transactions, track cost basis, segregate principal and income, provide scheduled and discretionary distributions, pay bills, manage life insurance policies and provide certain IRS required notifications to beneficiaries. At least annually, National Advisors Trust will provide a tax work sheet for trust return preparation and a full review of trust activity. 11

12 TRUSTS ESTABLISHED ON THE DEATH OF THE GRANTOR There often are many steps that must be taken when a Grantor dies before the beneficiary will know the size of the trust or the amount of income it will produce for the benefit of the beneficiary. For example, the Grantor may have owned property in the Grantor s name rather than in the trust s name, and those assets must be probated. In most cases, the Grantor will have a pour over will, and the assets then will pass into the trust. In most cases, the trustee also pays any debts the Grantor may have incurred as well as any income or estate taxes that may be due. If the value of all of the Grantor s property exceeded the applicable exclusion amount, a federal estate tax return also must be filed within nine months of the Grantor s death unless an extension is sought. After all of these steps have been accomplished, the trustee will administer the trust according to its terms for the beneficiary. That administration will include making the necessary distributions, administering the trust in conformance with its terms, overseeing the necessary tax reporting and providing regular accountings for the trust to the beneficiaries. SEAMLESS TRANSITION DECEDENTS TRUST ROLES AND RESPONSIBILITIES National Advisors Trust Supporting the Needs of the Trust Beneficiary National Advisors Trust Company has been created to support the fiduciary needs of trust beneficiaries who prefer to continue to maintain their professional relationship with the Trust Relationship Manager. The clients of the Trust Relationship Manager have enjoyed long standing relationships with the Trust Relationship Manager. The client has, in effect, already determined that the Trust Relationship Manager possess a level of integrity, competence, personal service, and cost efficiency that is acceptable to the client. When it is clear that the client s financial needs, family needs, or business needs could be addressed more effectively through the use of the trust services of a professional fiduciary, many of these clients do not want to lose the personal relationship and expertise of their trusted advisor the Trust Relationship Manager. 12

13 CONTINUITY OF FIDUCIARY ADMINISTATION AND SERVICE DELIVERY Many clients of Trust Relationship Managers utilize a living trust as their primary estate planning document and serve as the fist trustee. Following the death of the client, the trust agreement provides for the creation of successor trusts for beneficiaries who share in the benefits of the trusts. National Advisors Trust can serve as a successor trustee or as a co trustee with a family member or another individual, of these successor trusts. Naming National Advisors Trust as the successor trustee, or co trustee, as the case may be, in the trust agreement preserves for the client family a continuity of fiduciary administration and service delivery not possible with other corporate trustees. The Trust Relationship Manager understands and is sensitive to the client family who has just been through an experience involving the last phase of life of a loved one. With the Trust Relationship Manger, beneficiaries are not confronted with an unknown corporate entity that will exercise some form of control over their lives and assets. The Trust Relationship Manager s involvement puts the client family at ease and assists them in making the transition to National Advisors Trust as the designated successor trustee seamless, providing them with information and answering their questions in the most responsive and attentive way possible, and coordinates the efforts of the client s other professionals, including but not limited to attorney s and CPA s. Administrative Trustee Responsibilities Winding Down the Affairs of the Client On the death of the client, the trustee is responsible for carrying out certain administrative responsibilities prior to the creation of the successor trusts as specified in the trust agreement. While distributions may occur as required by the trust agreement, the trust must exist for a reasonable amount of time as administrative trust to insure that the client s debts, taxes, and expenses of administration are satisfied. The Personal Representative of a client s probate estate is the person primarily responsible for satisfaction of these administrative matters, but due to the wide spread and use of living trusts, many client assets are not subject to a probate administration. If the client s assets are titled in the name of a trust, and therefore, in many cases administrative duties fall to the successor trustee or co trustee named in the client s Living Trust Agreement. 13

14 Acceptance of Trust Relationships on the Death of the Client: Notify FiPar s Help Desk of the client s death Provide a copy of the client s estate planning documents for a document review Provide a copy of client s current account statements for an asset review and information as requested regarding any non standard assets. Provide name and contact information of the attorney who will represent the trust. All trust relationships must be approved for acceptance by two internal National Advisors Trust committees, namely the Risk Assessment Committee and Trust Management Committee. Meeting with the Family As soon as reasonable the Trust Relationship Manager should meet with the appropriate members of the client family, who may be co trustees and beneficiaries of the successor trusts created under the trust agreement. In many cases, it may be appropriate for the attorney for the estate to be present, at the initial meeting or at a subsequent meeting, to clarify the estate plan and any legal processes that may be required as a part of the administrative process. The client family needs to be fully aware of and the Trust Relationship Manager should clarify: Client s original purposes in creating the trust. The Trust Relationship Manager s role as the relationship manager, and that the Trust Relationship Manager will be the conduit in communications with the National Advisors Trust Company. The role of National Advisors Trust providing administration, distribution, and custodial trustee services, the general administrative functions it performs including, but not limited to, trust accounting and record keeping, tax compliance, satisfaction of mandatory and discretionary distributions, and generally complying with any administrative requirements required by the trust agreement. National Advisors Trust is available to meet with the client s family to explain their role as trustee and what duties and responsibilities that National Advisors Trust assumes as a successor trustee, or co trustee. 14

15 Compliance and Selection of Trust Counsel National Advisors Trust favors the retention of the attorney who drafted the trust document as the attorney to represent the Trustee. The client s confidence in counsel dictates retention of counsel absent evidence that counsel lacks the competency to address legal issues involved in the proper administration of the trust estate. Conflicts of interest should also be explored if counsel is attempting to represent parties with adverse interests. Marshalling the Assets The marshalling process while the client is alive is facilitated by the fact that when the client is alive and competent, that the client can change the registration on brokerage, custody, and depository accounts to transfer ownership to a revocable Living Trust created by client. The client can also execute deeds, assignments, stock powers to transfer other assets into the trust. If the transfer of all clients assets to the trust is accomplished during client s life, then at client s death the trust is fully funded and administration of the trust can continue without the necessity of a probate intervention. Notwithstanding that the client s trust is funded at death, National Advisors Trust, as successor trustee, and must furnish the transfer agent, brokerage firm, or depository the legal documents necessary to transfer the securities to its custody platform. This process may include: Re registration the account at the delivering firm. Obtaining decedent s death certificate. Providing an Affidavit of Domicile. Obtaining the signatures of all co trustees. Providing a Certificate of Incumbency. Providing trust documentation evidencing the identity of the successor trustee. On presentation of the transfer paperwork to the delivering custodian by National Advisors Trust and its approval of same, the transfer will proceed. Processing delays of 30 to 60 days can occur in the transfer of funds from a delivering custodian. These delays can be to the payment of debts and expenses or to meet a client family s liquidity needs. 15

16 Payment of Debts, Taxes, and Expenses of Administration Revocable trusts provide the trustee with authorization to debts, taxes, and expenses of administration. Payment of these charges is usually discretionary with the trustee allowing the trustee the ability to make discretionary judgments with regard to the validity of the claim. If a probate estate is opened the Personal Representative may pay any claims and expenses to the extent of cash and marketable securities are available, but the payment strategy is generally made after discussions with the attorney representing the estate. The trustee will discuss with the attorney the notice requirements required in a particular state which must be given to known or readily ascertainable creditors. Certain jurisdictions require that creditor notices be mailed within a stated period of time, or that notice be given by publication within a certain period of time. The trustee will comply with the required notice requirements. Special consideration must be given to claims by family members or friends for services provided by client, and claims by hospitals and medical providers. Tax Compliance and Selection of a Provider of Tax Services National Advisors Trust does not have an in house tax department to prepare fiduciary tax returns. The beneficiaries tax professional may be engaged to prepare the trust s fiduciary tax returns. If the Client, or the trust s beneficiaries, do not request their tax professional to be so engaged, National Advisors trust will outsource the tax return preparation duties to a CPA firm of its choice. Shortly after the end of January of each year, National Advisors Trust will deliver 1099 information and a tax work sheet to the tax preparer for their use in any preparation of the tax return. Upon completion of the tax returns, National Advisors Trust will provide the beneficiary and co trustee, if any, a copy, perform its internal review, sign and mail the returns to the appropriate taxing authority. The fees of the tax preparer are charged directly to the trust. 16