INVEST Trust Services Trust School 101

National Advisors Trust Company National Advisors Trust Company offers independent, objective trust and custody solutions which enable your organization to build and maintain multigenerational client relationships. This allows you and your organization to develop distinctive strategies that result in greater value to your clients.

Trust usage by the affluent Tiburon Strategic Advisors, LLC study found: Households with investable assets using trusts 39% of households $250,000 - $500,000 60% of households $500,000 - $1 million 72% of households over $1 million

Revocable Trust A Revocable Trust is so named because you can revoke (i.e. change or cancel) it at any time. It is also called a Living Trust because it allows the grantor the benefits of a trust while he/she is still living. A Revocable Trust provides flexibility. It allows the grantor to keep control over his/her assets while he/she is alive and maximize the amount of their property that will benefit their family (or other beneficiaries) after death. Because assets properly transferred to the living trust during the grantor’s life will, upon death of the grantor, 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 their beneficiaries sooner, at a significant lesser cost.

Revocable Trust – During Life Grantor can act as his/her own trustee, or designate a third party trustee, and designate a successor trustee to serve on his/her incapacity or death Grantor can designate an investment advisor to manage the trust’s investments. By Appointing a corporate trustee as trustee or co- trustee, grantor has access to a sophisticated record keeping service and guarantees that trust assets are properly recorded to orderly transfer at time of death. Bill payment Enhanced tax reporting

Additional Trust Provisions to Consider Allocation of responsibility for non-standard assets to a corporate trustee Authority of trustee to change situs Authority to make amendments to the trust agreement

Revocable Trust - Incapacity Risk of Grantor becoming incapacitated during life Key question: Who will manage grantor’s financial affairs if grantor can’t and what provisions insure that this will happen – Court appearance vs. corporate trustee Assets in a Revocable Trust will continue to be managed as they were prior to incapacity, by the successor or corporate trustee Power of Attorney not always the answer

At Death – Continuity of Services Trust Relationship Manager remains the point of contact Relationship manager for beneficiaries Knows the grantor’s wishes Maintain existing professional relationships Attorneys CPAs Other professionals

Marital Deduction Trust – “A Trust” A Marital Deduction Trust is created from a revocable trust or from a “pour over” will. A Marital Deduction Trust is sometimes referred to as the “A” trust in an individual’s estate plan. The trust consists of property that qualifies for the marital deduction. The Marital Deduction refers to that portion of a deceased spouse’s estate that may be passed to the surviving spouse without becoming subject to the Federal Estate Tax. It is unlimited and it may be as much as 100% of the adjusted gross estate. The two most common Marital Deduction Trusts are (1) surviving spouse has a general power of appointment over the trust assets (2) QTIP Trust provisions. The trust is an irrevocable Trust.

Credit Shelter Trust – “B” Trust A Credit Shelter Trust is created from a revocable trust or from a “pour over” will. A Marital Deduction Trust is sometimes referred to as the “B” trust in an individual’s estate plan. A Credit Shelter Trust (also known as the “Family Trust or Non-Marital Trust is usually employed as part of the testamentary estate plan, that is funded with the applicable exclusion amount from an individual’s estate. The Applicable Exclusion Amount is the amount of property which can pass without federal estate tax either during a person’s life or at death. (this amount will be $3.5 million in 2009). The trust is an irrevocable trust.

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 that will be due at death. Ideal for “second” families Ideal for assets that are expected to “highly” appreciate “Can’t take it with you, but can “manage from the grave”

Charitable Remainder Trust A Charitable Remainder Trust is a trust for a fixed term of years or a life (the “life interest”). Upon termination of the life interest, the trust assets are given to a qualified non-profit organization. The life interest beneficiary is entitled to yearly distributions from the trust. This is usually a member of the grantor’s family. Grantor cannot be the trustee It is an irrevocable trust The life interests are calculated as an annuity on a fixed yearly distribution (CRAT) or calculated on a percentage of the trust’s principal (CRUT) unitrust. May retain a limited power of appointment to change the charitable remainder interest.

Charitable Lead Trust A Charitable Lead Trust is for a fixed term of years or a life during which a qualified non profit organization is the beneficiary, and the remainder or principal interest, upon termination of the trust, is given to non charitable beneficiaries, such as members of the grantor’s family. Ideal for individuals with moderate to large taxable estates Have given to charities in the past Hold assets with great appreciation potential Gift & estate Tax deduction on the value of the assets transferred Growth of assets are transferred tax free

Special Needs Trust Special Needs Trusts provide for continuing conservation and enhancement of the assets transferred to the Trust to supplement other benefits for which the beneficiary might be eligible as a result of the beneficiary’s disability, whether through public or private, profit or non-profit corporations or agencies. These trusts can be from settlements which are generally funded from a personal injury lawsuit; or may be created simply as an intervivos or testamentary transfer by a family member with their own funds with the intention of benefiting a disabled person without disqualifying the disabled person for public benefits.

Irrevocable Life Insurance Trust An Irrevocable Life Insurance Trust (ILIT) is a 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 are not included in the grantor’s estate for estate tax purposes. This type of trust is sometimes used by individuals to provide liquid funds necessary to pay estate taxes – no disturbance of the other assets of the grantor’s estate This type of trust is commonly used by individuals as a “replacement” for assets given to charities or spouse They can be used by business owners to provide liquid funds for the business. Must comply with “Crummey” provisions.