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Trust Services: Not Just For Tycoons

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By Catherine M. Krokus

The idea of trusts conjures up images of dusty ledgers filled with obscure figures. John D. Rockefeller had trusts; Bill Gates has trusts; but not the man on the street.

In fact, most consumers–and many financial professionals–regard trusts as too complicated and intimidating.

This misconception is unfortunate, because millions of Americans could and should be thinking about personal trust services. So should independent financial advisors, because personal trust services are an excellent way to strengthen relationships with clients and fortify their practices.

The idea that trusts are only for the rich is about as outdated as those dusty ledger books.

Today, clients with approximately $250,000 or more in financial assets may be able to take advantage of the benefits personal trusts offer to protect the assets theyve worked so hard to accumulate over the years.

For instance, life insurance policies that are purchased in an irrevocable life insurance trust will pass the wealth to the next generation free of estate taxes. Clients with charitable intent, but a need for current income, should look into a charitable remainder trust or charitable gift annuities. Both options will avoid capital gains and estate taxes, and often will boost the clients income.

Trust services will also ensure that the clients assets will be managed and distributed after death according to his or her wishes. This benefit is substantial in view of the trillions in assets that will transfer to heirs over the next 50-plus years.

For example, clients are increasingly concerned that the legacy they wish to leave their children might become contested in a divorce. By placing the assets in trust for the ultimate benefit of their children, the makers of the trust can be assured that their wealth does not pass to their childrens ex-spouses.

Finally, families today are dispersed around the United States and around the world more than any previous generation. Elderly parents are often able to manage daily living on their own or with nursing assistance. In many cases, however, they need additional assistance with routine financial matters.

If the children or other heirs live miles away, it may be difficult for them to fill this role. In these instances, a trust company acting as either trustee or agent can pay routine bills and maintain all financial records for the assets held in trust.

Personal trusts can give a boost to a financial advisors businesses, as well. After all, the most important way to nurture strong relationships with clients is through communication.

This is especially important during uncertain times like these. Financial advisors should be talking to their clients, reassuring them about their financial affairs and fine-tuning their clients strategies, if appropriate.

Personal trust services provide a compelling reason to contact clients. Trusts provide an additional service link–one with an average life of 17 years–that can fortify these relationships.

Furthermore, trust services serve as a “bridge” from one generation to the next. This bridge helps advisors cultivate these new relationships.

In sum, the time has never been better to explore personal trust services. But here are two words of advice: “Advisor beware.”

Many financial professionals, especially those new to trust services, refer clients to a local commercial banks trust department, simply because that is the only place they know that offers these services.

This practice might be incompatible with building long-term relationships with clients for a few important reasons. First, clients probably wont receive the same personal, one-on-one service theyve become accustomed to receiving from their financial advisor. Second, a bank may attempt to go beyond offering trust services and aggressively sell its own financial products and services, making clients vulnerable.

On the other hand, independent trust companies deal exclusively in trust services and will work hard to help advisors strengthen relationships with clients.

Catherine Krokus is president and CEO of ING National Trust, Hartford, Conn. Her e-mail address is [email protected].

Reproduced from National Underwriter Life & Health/Financial Services Edition, May 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.