Lesa Barks and Melanie McNeill answer the 10 most asked questions about TRUSTS
A MAY SEEM LIKE A BIT of a mystery to many people, but in fact, trusts are usually rather simple solutions that can help people accomplish important goals. They can be an effective tool for managing your assets during your lifetime and for the benefit of your loved ones after you are gone. Utilizing a trust ensures that your assets are administered without disruption and passed to the next generation according to your instructions.
A trust can provide significant advantages to clients including:
- Investment management to meet current and future financial needs of your family
- Substantial federal tax savings
- Accelerated estate settlement avoiding probate court
- Enhanced financial security for your family
- The ability to control the disposition of your assets over an extended period
- The opportunity for philanthropic or charitable contributions during your lifetime or after your death
#1 WHAT IS A TRUST?
A trust is a legal arrangement you create with your attorney so a trustee can hold and manage the property you place in trust. By following the guidelines set forth by you, The Paducah Bank and Trust Company cares for the property strictly for your benefit and/or the benefit of another person or charity you choose as beneficiary(ies).
#2 WHAT ARE THE ADVANTAGES OF HAVING THE PADUCAH BANK AND TRUST COMPANY AS YOUR TRUSTEE?
With The Paducah Bank and Trust Company as your trustee, you can expect broad investment capabilities and arrange for the performance of any number of special services for current or future needs. These personalized services could range from paying bills while you are traveling abroad to providing full personal financial management in the event you suffer an incapacitating illness.
#3 IS IT DIFFICULT TO SET UP A TRUST?
No. 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). Then you deliver the assets you wish to place in trust to your trustee. There are several different types of trusts, and we can assist you in deciding which is the best for your unique situation.
#4 IF I CREATE A LIVING TRUST, CAN I KEEP CONTROL?
Certainly. Usually, our trust clients choose to keep control in two ways:
- The trust agreement specifies the creator may make withdrawals or additions at any time.
- The creator reserves the right to change or revoke the trust.
#5 CAN I MAKE THE INVESTMENT DECISIONS WITH A LIVING TRUST?
Yes, 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 wish. After all, it is your trust. Below are some options:
- You may spell out your investment objectives in some detail, leaving the selection of specific investments to us as trustee.
- You may ask us to submit each proposed investment change for your approval until you are satisfied we are interpreting your investment objectives correctly.
- You may ask us to submit recommendations, while also researching some opportunities on your own.
#6 IS TRUST SERVICE EXPENSIVE?
No, our fees are competitive with those charged by investment advisory firms (services that may not include custodianship of securities, record keeping and other conveniences that Paducah Bank offers) or by mutual funds.
#7 HOW BIG MUST A TRUST FUND BE?
If you think of millions of dollars when you hear the word “trust,” you are the victim of a widespread misconception. Today’s trust institutions have developed ways to handle even relatively small trusts efficiently. In any case, we do not think in terms of fixed minimums. Instead, we ask ourselves, “Is a trust the best way to meet this person’s financial management needs?”
#8 HOW MUCH OF A RETURN WILL I GET ON MY MONEY?
That depends on your goals—current income, long-term growth, or a balance of the two. Historically, diversified portfolios of quality stocks have produced a total annual return (dividends plus growth in principal value) averaging around 10%. Bonds have produced somewhat lower returns over all, but they offer a higher level of current income than stocks.
As a trustee, our goal is to provide consistent returns over the years. We emphasize careful asset allocation, the selection of fiduciary-quality investments, and constant vigilance.
#9 ARE TRUST FUNDS INSURED BY THE FDIC?
Primarily, trust funds are invested in stocks, bonds, or mutual funds. 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 and are under strict audit controls.
#10 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 are not required to create a trust. If you prefer, you can put us to work on a less formal basis. A simple contract designating us to act as your investment agent will get us started.
SO HOW CAN YOU FIND OUT MORE ABOUT TRUSTS?
That is easy. The trust and investment professionals at The Paducah Bank and Trust Company will be glad to assemble further information for you, analyze your investment objectives, and answer questions not covered here. Please call us at 270.575.5731 for more information.