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February 01, 2007 at 02:00 AM
How would you like to offer services akin to the nation’s largest banks and trust companies — with one key difference: You remain the central point of contact for your client, and you continue to manage the assets and advise the account.
When Patricia Hinds, a Minnesota-based advisor I know through Securities America, told me she was using something called Advisor Directed Trust, I sat up in my chair. Financial advisors I’ve spoken with in the past have expressed increasing disenchantment with trust departments at large banks. At the same time, as the population ages, more and more baby boomers are planning their own estates, as well as those of their parents. And trusts are a part of the answer.
Personal trusts are a powerful estate-planning tool, helping people preserve their assets for future generations. There are many reasons people create personal trusts:
o Control wealth distribution to heirs
o Reduce potential estate-tax liability
o Avoid probate
o Maintain privacy
o Allow tax-efficient gifts to charities
o Provide for needs in the case of illness or incapacity
Special-needs trusts are being used more frequently to provide income for disabled children after their parents die. Trusts are also used to protect assets — a smart move given the number of lawsuits filed every year in the United States. Trusts aren’t just for the very wealthy; they can be useful to many individuals who have investments, real estate, life insurance policies or other assets to pass on to future generations.
Trusts are versatile planning tools that allow clients to direct how their assets are managed during their life and upon their death. As written legal arrangements, trusts allow them to appoint a person or corporation (called the “trustee”) to administer and distribute assets based on their wishes. Choosing a trustee is a significant decision. While the client can designate almost any individual to oversee the administration and distribution of their assets, even financially sophisticated individuals or family members can find managing a trust a complex and burdensome experience. This is why many clients feel more comfortable making a corporation responsible for administering their trust assets according to the terms outlined in their trust. The advantages of experience, objectivity, reliability, longevity and professional administration are hard to deny.
