Financial Planning and the Role of Trusts

When Mr. Executive was asked to oversee his company's affairs in Europe, he jumped at the opportunity. But he hesitated, too, because he knew he'd have to spend long periods away from his home in America and he worried about his investments. Who would monitor them and make the necessary adjustments while he was away?

Like any good executive, though, he didn't worry long. He explored his options and decided to use a living trust to manage his investments whenever he had to travel. This "standby" trust only became fully operative while he was away, and he was able to resume his investment management whenever he returned.

An interesting thing happened, however. Mr. Executive enjoyed his work so much and was so pleased with the way his trust operated that he decided to expand both. He began to travel more and he changed his trust arrangement from a standby trust to a revocable living trust. So instead of having his trustee manage his investments only while he was away, Mr. Executive asked his trustee to manage his investments on a full-time basis.

But that's not the whole story, either. Since Mr. Executive was traveling more often, he increased his life insurance coverage significantly. And to ensure that his life insurance proceeds would be managed properly after his death, Mr. Executive created a life insurance trust. The trustee of this trust would see to it that the insurance proceeds would be properly managed and Mr. Executive's wife and children would be provided for according to Mr. Executive's directions.

Is Mr. Executive finished with trusts now? Probably not. As his life continues and his circumstances change, he will probably find new opportunities and new situations in which other trusts will be appropriate. For example, he may decide at some point to use a charitable trust to benefit his favorite charity. Or he may decide to implement a trust under will to carry out the provisions in his last will and testament. Whatever the situation, it's likely Mr. Executive can find a particular trust instrument to meet his needs. You can, too. Here's how a typical trust works.

As the grantor, you create the trust with a certain purpose in mind. Since a trust is one of the most flexible financial planning instruments around, you can use it as Mr. Executive did or you can use it as your own particular needs warrant. When you establish the trust, you're actually setting up a legal arrangement with a trustee who agrees to manage the trust for your benefit or for the benefit of your designated beneficiaries. The trust may be either revocable or irrevocable.

If you think a trust might fit into your financial picture, why not give us a call. First Market Bank's Trust Department has both the expertise and the experience necessary to help you establish your trust and to serve as your professional trustee. In addition, as a permanent fixture in this community, you know we'll be here to assist you and your beneficiaries in any way and at any time. To contact us call 1-804-327-5749.