P l a n n i n g
Y o u r
E s t a t e
Trusts
Under
Will
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The story is rather melodramatic. Husband or Wife dies and, in a will, leaves
all of his or her estate outright to the surviving spouse. Due to financial inexperience — or the bad advice of friends or
relatives — the surviving spouse makes
unwise investments and loses the nest egg
that was intended to provide lifetime
financial security.
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“Stop right there,” you say. “My spouse is
perfectly capable of handling finances.”
This may well be true. But other factors
beyond your control — an accident or
your spouse’s illness or remarriage, for
example — may put someone you don’t
want or don’t know in charge of the
assets you’ve left your spouse, with potentially disastrous results.
nWhat Cann
You Do?
How can you provide for the continuing
management of your assets after death? One
answer is a trust under will. A trust under
will (or testamentary trust, as it is also
known) is an arrangement you create in your
will. Under this arrangement, you direct
your trustee to hold and manage certain
assets after your death for the benefit of
your family or other beneficiaries. Your
trustee distributes trust income and principal at the times and in the manner you have
set forth in your will.
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A Versatile
nPlanning Tooln
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Trusts under will are very versatile and
can play an important role in almost any
estate plan. With a trust under will, you show
your ongoing concern and consideration for
your family and other beneficiaries. How? A
trust under will shifts the administrative and
investment burdens of asset management
from your beneficiaries to your trustee.
A trust under will can protect the interests of beneficiaries who are minors or otherwise inexperienced in financial matters. It
can give you peace of mind, knowing your
estate will be distributed exactly the way you
want — as you have directed in your will.
In addition to providing asset management, you can use a trust under will to make
charitable gifts. Your trust can provide an
individual beneficiary (or beneficiaries) with
lifetime income and direct that the remaining
gift property pass to the charity of your
choice at the beneficiary’s death.
And there’s more. You can use a trust
under will to secure the estate-tax marital
deduction for property that otherwise would
not qualify for the deduction.* You can even
set up your trust so that your estate may
claim the marital deduction even though
your surviving spouse receives only a lifetime income interest in the trust property.
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* The estate tax will be repealed in 2010; however, it will return
in 2011 unless Congress acts to make repeal permanent.
You also can use a trust under will to
unify your estate. By directing that employee
benefit plan assets, insurance proceeds, and
other similar payments be paid to your trust,
all your assets can be managed together and
distributed as you want.
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Common Types of
nTrusts Under Willn
Some of the more common types of
trusts under will are briefly described below.
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Life Insurance Trust
With a life insurance trust, you name
your trustee as beneficiary of your life
insurance policies. The trustee collects the insurance proceeds at your
death, prudently invests them, and
distributes them to your beneficiaries
in the manner specified in the trust
provisions of your will.
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Trust for Children
If you and your spouse both die, a
trust under will can hold your assets
for your children until they reach a
certain age. In the case of children
who are minors, such a trust avoids
the necessity of having a court
appoint a guardian or conservator for
your children’s inherited property.
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The following three types of trusts are
used primarily to save estate taxes, which
will be phased out through 2009, repealed in
2010, and then reinstated in 2011 unless
Congress acts.
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Bypass (Family) or Credit Shelter
Trust
You can use this trust to minimize the
tax bite on your spouse’s estate
(assuming he or she dies after you) or
on those assets which later pass from
your surviving spouse to your children. A bypass trust can make optimal
use of both your and your spouse’s
federal estate-tax credits. (The credit,
which is available to all estates, allows
a certain amount of assets to pass to
heirs estate-tax free. That amount will
increase in steps from $2 million in
2006 to $3.5 million in 2009.)
Here’s how it might work for a 2006
estate. Up to $2 million of assets
would go into a trust created under
the will (the bypass trust). This trust
wouldn’t qualify for the marital deduction and its assets wouldn’t be
included in the surviving spouse’s
estate, even though he or she may be
an income beneficiary of the trust. At
the surviving spouse’s later death, the
trust assets would go to the children.
This arrangement lets up to $2 million
pass to the children tax free. It also
allows the estate of the second spouse
to die to use the $2 million (or higher)
estate-tax credit exclusion amount to
the best advantage.
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Marital Trust
A well-constructed marital trust lets
you provide for your spouse’s lifetime
support without leaving your property
directly to him or her. Property in the
marital trust qualifies for the estate-tax
marital deduction. Marital trusts are
often used with bypass trusts in an
estate-planning arrangement known as
the two-trust estate plan.
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Qualified Terminable Interest Property (QTIP) Trust
A QTIP trust is a type of marital trust
that gives you complete control —
through your trust agreement — over
who will receive the trust property at
your spouse’s death. With a QTIP
trust, the executor (or personal representative) you’ve named to administer
your estate may elect to use the unlimited marital deduction for the trust
property, even though you give your
spouse no more than a qualifying lifetime income interest in that property.
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Other
Advantages
In addition to versatility, a trust under
will can offer you and your beneficiaries
other advantages. These advantages include:
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Professional asset management. If you
name an experienced asset manager
such as our organization as trustee of a
trust under will, your assets will be
professionally invested and managed
for your beneficiaries.
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We will manage the trust assets
according to the general guidelines
you establish in your will. We will
distribute the assets according to
your wishes.
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Design flexibility. Your trust can be
as flexible as you wish to make it. You
can give your trustee (or even a beneficiary) the discretionary power to use
the trust principal for an emergency,
for a child’s or grandchild’s education,
or for any other reason you choose.
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Longevity. A trust under will is especially useful if you want to benefit several generations of beneficiaries.
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Future cost savings. Your trust under
will also may reduce future probate
expenses and federal estate taxes that
might otherwise be incurred by your
beneficiaries’ estates.
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Choosing
a Trustee
the trust will live up to its potential for ensuring your beneficiaries’ well-being.
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A trust is only as beneficial as the trustee
you select to administer it. Unless you
choose a well-qualified trustee for your trust
under will, your family may not receive the
benefits you want them to have — the very
benefits you created the trust to provide.
When you name our organization as trustee or co-trustee of your trust under will, you
and your family secure the services of one of
the most qualified trustees available. Not
only do you benefit from our employees’
extensive investment and asset management
experience and expertise, but we furnish
numerous administrative services as well.
For instance, we:
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Safeguard the trust’s investment assets;
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Maintain accurate records of all trust
transactions;
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Distribute trust income and principal
strictly according to the directions
you’ve placed in your will;
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Answer any questions your beneficiaries may have concerning the trust;
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Take care of day-to-day financial matters for the beneficiaries as you have
instructed us;
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Report to the probate court, when
necessary;
With a trust under will, you set the framework for the asset management services and
protection you want for family members and
other beneficiaries. But merely creating a
trust in your will cannot by itself guarantee
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Provide detailed statements of account and tax reports to the trust’s
beneficiaries; and
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File the trust’s income-tax returns.
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You Can Depend
on Us
We take our trustee responsibilities very
seriously, performing our duties with a high
degree of competence and unbiased judgment. Moreover, as a professional trustee,
we’ll be here for your beneficiaries. We won’t
move out of state. We won’t take extended
trips that make us inaccessible to your beneficiaries. Our services will continue uninterrupted and unaffected by the personal and
business concerns that often distract individual trustees from their responsibilities.
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Does a trust under will have a place in your
estate plan? We are available to help determine if a trust under will can benefit you
and your family. We invite you to contact
us at your convenience.
Copyright © 1993, 1997, 2000-2006 by NPI
3:8 (2/06)