The Standby Trust. proof

Transcription

1 P l a n n i n g Y o u r F i n a n c e s The Standby Trust

2 Anticipate your future, and you control part of it. With planning, you re a driver. Without it, you re a passenger. Whether it s your business or your personal finances, planning is essential to controlling the success of your tomorrow. But when you have complex business, family, and financial responsibilities, your planning must move beyond ensuring that you ll have enough money. The possibility of physical or mental incapacity can t be ignored. Your financial assets require continuing, competent management. A standby trust can provide that management when you aren t able to. nif You Can tn Who Will? Your list of financial assets may consist entirely of stocks, bonds, and other securities. It may also include investment real estate or control of a closely held business. You may own many different securities or relatively few. Of course, all financial assets require considerable attention. You are the one who: Watches the markets and the values of your holdings Makes the buy and sell decisions Keeps the records Makes sure that tax returns are filed Reinvests the income or decides what else to do with it

3 It s a big responsibility. Right now you re doing it all. What would happen if you could no longer take care of your finances? You probably have a will to handle the transfer of your assets when you die. But, before that, many other things might happen that your will can t cover. While it s not pleasant to contemplate, you could be paralyzed by a stroke or an accident. You could suffer a prolonged illness. You could develop Alzheimer s disease. Or you could simply be abroad on a long trip when a major market break demands fast investment decisions. It s also quite possible that you have become tired of all the recordkeeping involved in managing your investments. Right now, you probably are your own financial administrator, collecting income, keeping transaction and tax records, making trades, and following up on them. You may have other uses for your time. With so much responsibility, you need to have a good backup. You need someone you can rely on to manage your assets if you are unable to do so. Your spouse may not have the experience, judgment, and interest needed to manage your investments. He or she could also be incapacitated with you in the same accident or be away on the same trip. Your children may be similarly unprepared for major investment responsibilities. The best answer to finding competent backup is this: Seek professional help before a problem develops. nthe Trust Thatn Backs You Up Today s most practical and effective way to ensure continuing management of your financial assets is a standby trust. This is a legal arrangement that allows a trustee (almost always a professional investment manager and administrator) to take over for you if and when a carefully defined triggering circumstance occurs. You set up a standby trust also sometimes called a successor or contingency trust to legally transfer property from you the grantor to a second party the trustee. The trustee holds the property for the benefit of a third party the beneficiary. Usually, you (or you and your spouse) are the beneficiary of the standby trust that you create. You control your assets. The trustee has no decision-making power or investment responsibility until a defined, predetermined event occurs. In other words, the trustee stands by, waiting to back you up if and when a triggering event you have specified occurs. The trust only becomes fully operative at that time. You are not limited to one or any number of triggering events. The specific circum-

4 stances are entirely yours to define. You could allow your trustee to act if you: Become mentally unable to manage your finances either temporarily or permanently Are unreachable for a specified time because of travel or other difficulties Request it for any reason A standby trust is typically a revocable trust. So, you can end it or amend it at almost any time. Of course, one obvious circumstance limits this. Your power to revoke the trust generally would be ineffective if your trust becomes operative because of your mental incapacity. Here s how a standby trust solved one woman s problem. Ann was manager of U.S. human resources for a multinational publisher. At age 56, she owned a portfolio of stocks, some tax-exempt bonds, and a townhouse. She also maintained a cash cushion in a savings account. Ann had been single for the ten years since her divorce, and she had no children. When she divorced, Ann had rearranged her finances. One suggestion that she followed then was to set up a standby trust. She gave her trustee reserve power to manage her portfolio, plus pay her household and personal expenses. The triggering conditions she chose that would allow her trustee to act for her included any physical disability that prevented normal management of her financial affairs. For 13 years, Ann remained in excellent health, and her trust stayed on standby status. Her trustee helped her during that time by collecting her investment income, keeping her securities records, and making the stock trades she ordered. That was because when she created her trust, Ann had also made her trustee custodian of her investments. One July night at the start of her summer vacation, a drunk driver sideswiped Ann s car and forced her into a drainage ditch. She was confined to bed for many weeks with multiple casts and had recurring vision problems. For the entire nine months of Ann s convalescence, her trustee took over for her: managing her portfolio in line with her investment objectives, paying her bills, taking care of her household and personal expenses, and preparing her tax returns. Her trustee took care of everything. And Ann concentrated on her recovery. When she was ready the next spring, Ann began handling her own finances again, and her trustee returned to a standby role.

5 Other nadvantagesn In addition to serving as your backup, a standby trust also gives you a number of other advantages: Control You keep complete control of your assets for as long as your trust is not operative, and you can also change your trust after it takes effect. Peace of mind You know that if your trust does become operative, your investments will be managed as you determined in advance with your trustee. Estate planning advantages You can choose to have your standby trust continue after your death and provide in your will that some or all of your remaining property be poured over into your trust. Your trustee would then administer and distribute the trust property as a single, unified fund benefiting your family or other beneficiaries. This strategy may help shield your estate plan from publicity. Trust documents, unlike your will and other probate records, are not generally available as public information. considered part of your probate estate. These assets pass to your beneficiaries outside probate. And a smaller probate estate lowers the probate costs your estate must pay. Easy setup A standby trust is relatively simple to create. The Ideal nfirst Stepn Your standby trust is a reliable backup that can be in reserve or ready to go immediately, as you choose. With a reserve role, your trustee will not be involved with your investments before an event occurs that triggers the standby trust. So, there can be some delay while the trustee takes possession of the assets. You can avoid that delay by turning over the physical possession (custody) of your securities and other investment assets to us when you set up your standby trust. We will hold your assets, but you will retain complete ownership and investment decision-making power. We will act as your financial administrator to: Lower probate costs The assets that are already in your standby trust when you die are not Execute your buy and sell decisions Keep complete records of your investment holdings and transactions

6 Hold your securities in our safe custody Collect all investment income and reinvest or distribute it as you instruct us Report tax information and account status to you periodically Perform related duties like bond redemptions, coupon collections, and proxy handling The transition from custodial service to trustee service will be smooth, fast, and simple if it is ever needed. We will be ready to go, with no interruption or delay in carrying out your trust s defined objectives. Having custody of your investments will also allow us to easily assume temporary responsibility for managing your investments while you travel or vacation, if you so desire. To a large extent, the future is what we make it. A standby trust is a proven way to ensure that at least one significant part of your future your financial security will be well taken care of. You can use your trust to avoid many possible difficulties for yourself and for your family. We can assist you in setting up your trust, and we can be your reliable trustee if ever we are needed. Please talk to us if you want to learn more about a standby trust. Copyright 1993, 2000, 2003 by NPI 2:6 (1/03)