What You Should Know About Trusts in Which You Have an Interest

Trusts have an aura of mystery about them. Even trust beneficiaries are sometimes unsure of how their trusts work. One culprit, we feel, is the legal language so often used to describe trusts. Another is a hesitation on the part of trust beneficiaries to ask questions.

We'd like to demystify trusts. First, with a simple definition: Trusts are financial-planning instruments that involve three parties. The trust creator (grantor) sets up the trust. The trustee manages any property (typically stocks, bonds, and cash) the creator puts in the trust. And the beneficiary receives payments of income and/or assets from the trust.

Second, with a run down of what you, as a beneficiary, should know about trusts you have an interest in:

• The purpose of the trust.
• When you will begin to receive trust payments.
• How often the payments will be made.
• What amounts you will receive.
• How long you will receive payments.
• Whether your payments will include trust principal as well as income.
• How the trust assets are invested.
• Whether you can transfer your interest in the trust to someone else.
• Any special restrictions on the trust income or use of the income.
• Who will receive any assets remaining in the trust when and if the trust ends.

You should also understand how the income generated by the trust will be taxed. Trust income distributed to you will be taxed to you at your individual income-tax rate. Income retained by a trust may be taxed to the trust at a higher rate than income distributed to beneficiaries.

And, third, we can demystify trusts with an explanation of what the trustee should do for you. A trustee's basic responsibility is to manage and distribute trust income and assets as the trust creator has specified in the trust agreement. A good trustee will do much more.

For example, when our organization serves as trustee, we:

• Use our considerable investment expertise to invest trust assets in the manner that will best meet the trust creator's objectives.
• Make tax decisions concerning the trust.
• Maintain complete records of all trust transactions.
• Keep you informed with periodic statements.
• Send you the information you need to complete your tax returns.
• File the trust's income-tax returns.

But, more important, we explain the trust's operation to you and other trust beneficiaries in plain English. We spell out what our responsibilities to you are. And we encourage you to ask questions. We want you to fully understand what to expect the trust and from us.

If you want to know more about First Market Bank's Trust Department or trusts in general please call us at 1-804-327-5749.