August 23, 2006

$ And Sense

"Professional Trustees Play Many Roles"

When you set up a trust, you will choose a trustee whose function it will be to oversee and administer the assets of the trust according to the instructions specified in the trust document. Keep in mind that property in a trust isn't just held, it is also invested and distributed according to the terms of the trust.

Therefore, when you create a trust, you will need to decide how much authority — broad or limited — you want to give to your trustee. For example, you may choose to give the trustee "investment discretion" or for certain types of trusts you may elect to retain full investment discretion over the assets of the trust yourself.

While the trustee you select may be an individual, such as a friend or relative, you may instead hire a professional corporate trustee. Unlike an individual trustee, a corporate trustee won't die, move away, take a vacation or be biased or distracted by personal concerns.

If you choose a professional trustee, he or she will play many roles. Some of the important ones are:

Estate Planning Assistant. Trusts are the cornerstones of an effective estate plan, helping to protect wealth and maintain investments for future generations. Your trustee can work with your estate planning attorney and financial advisor to help you achieve your specific financial needs and goals through trusts. Some individuals set up a trust to take care of investments and protect wealth. Others may want a standby trust that goes into effect only if a predetermined event, such as disability, occurs.

Investment Professional. When you give full investment discretion to a corporate trustee, trust investment professionals work with you and make investment decisions based on your investment guidelines and risk tolerance. (If you opt to "self-trustee" or name someone else as trustee, a trust company can still provide you with record keeping and administrative services while you or the trustee named by you will hold fiduciary responsibility for the trust and be responsible for investing its assets.)

Tax Preparer. One of the most important responsibilities of a trustee is to handle, accurately prepare and submit all required tax forms related to the trust. Your trustee should be experienced in performing these tax duties. It helps if your trustee has access to experienced tax professionals who can anticipate any complications regarding income taxes and gift and estate taxes.

Record Keeper. Your trustee should keep all trust records and activity up to date, as well as execute, buy and sell orders, collect your investment income and deposit, disburse or reinvest the income as your trust document directs. Your trustee should also prepare periodic statements for you (and the trust beneficiaries, as requested).

Security Guard. Your trustee is responsible for protecting your trust assets and keeping them separate from other trust accounts. In addition, your trustee may not use your trust's assets for the trustee's own financial obligations. Because of these responsibilities, it is important that you make sure your trustee is reliable and financially stable.

When it comes to planning a trust, understanding the various roles and responsibilities expected of its trustee is helpful before you begin. Be sure to consult your tax and legal advisors before making any tax-related or legally related decisions.

If you'd like to learn more about Professional Trustees, please call:

Michael Pellman

Financial Advisor

Retirement Planning Specialist

Riverhead, NY



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