Strategic Asset Management With a Revocable Living Trust

Developing a sound investment management strategy is more than allocating assets and diversifying among the various asset classes. It is also about attaining your financial goals in life. The long-term security of your family is likely to be a key goal. To reach it, you want to ensure that your assets will continue to grow—providing the income that your loved ones will need to live comfortably, should you not be able to provide for them. And one of the most valuable resources available to help you achieve that goal of long-term financial security is a revocable living trust.

Living trusts: the facts

A revocable living trust allows you to arrange for the management of your assets both while you are alive and after you are gone. By establishing your trust now, you may be able to reduce the stresses and strains that your family may experience when they are forced to make difficult financial and investment decisions after you’re gone.

Think of a trust as a container, a place where you can transfer your securities, real estate or other property. This transfer is accomplished by making the trust the new owner of your assets. However, you retain control while you live, and you can direct what happens to the assets after you are gone, or are unable to make the necessary decisions about their management. These instructions are contained in a trust agreement that will be implemented and administered by the trustee that you name to oversee the trust.

Neither the instructions in the trust agreement nor the trust itself need have a permanent life. The directions that you give today may be altered in any way, at any time. The trust itself, if necessary, can be revoked, and your assets transferred back to you.

A strategy designed to your specifications

Your trustee will serve as the manager of the trust’s investments. When you name a corporate trustee, such as our institution, we can assist you in developing the strategy that will best serve you and your family, based upon your personal circumstances. For example, we will review your long- and short-term objectives, your risk tolerance, liquidity needs, tax considerations and a host of other variables in order to make certain that the investment choices made match your needs and expectations.

When we assist you in formulating and developing an investment management strategy, you may delegate to us in the trust agreement the authority to execute all of the investment decisions. Alternatively, you can require us to submit recommendations for your approval. In all cases, as trustee, we will be responsible for all the paperwork and chores associated with the management of your assets.

Here’s an added benefit, and it’s an important one: By setting up a living trust now and naming us to serve as your investment manager, you can “preview” our performance. By observing our actions now, you will have the peace of mind of knowing that you will be leaving a capable, knowledgeable investment advisor to serve your family later.

Just in case

If you haven’t yet made the decision to integrate an “active” living trust into your current financial plans, you may want to look at an alternative—a standby trust.

A standby living trust offers you the opportunity to achieve a high degree of protection for yourself and your family should you become ill or incapacitated. Yet you maintain total control of your investments. The trust is activated only when you are unable to manage your investments, and only for as long as necessary.

In addition, the trustee can be directed to use the trust’s assets to pay household bills and taxes, for example. At a time when your loved ones are apt to be burdened by concerns other than financial ones, they will have the confidence of knowing that professionals are managing the family’s finances in your absence.

Additional protection: an estate planning strategy

When you establish a living trust, you designate two types of beneficiaries. There are the income beneficiaries (typically, yourself and your spouse), who receive regular payments of the trust’s income or principal as outlined in the trust agreement. At the termination of the trust—at your death or some other specified time—those whom you name as your remainder beneficiaries will receive the assets in the trust. But the trust may continue beyond your lifetime, and become an integral part of your estate plan. There are good reasons for coordinating a will and a living trust.

A living trust can operate as a highly efficient organizational tool, providing a unified approach to the management of your assets. For instance, assets such as the proceeds from a life insurance policy or a retirement plan may be paid to a living trust that you have established and which, at your death, becomes irrevocable.

As a result, you can ensure that your family will have a continuous, uninterrupted flow of income. In addition, you can set up an orderly distribution plan for your assets, either over a certain number of years or keyed to certain circumstances.

Finally, having all of your assets “under one roof” will make it easier for your spouse and other beneficiaries to keep track of how the family’s assets are being managed and to know where to turn with questions or concerns.

Additional benefits

At your death the assets in your living trust will not be subject to the potential delays and costs associated with the probate process. In addition, although the terms of your will can be made public, a trust is a private document and, generally, escapes public scrutiny.

This latter point can be especially important in the event that you become disabled and cannot manage your financial affairs. Contrast the privacy of a standby living trust, which springs into action immediately and without fanfare, with the potential for publicity, time and expense when formal conservatorship proceedings must be commenced in a probate court setting.

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In sum, then, a revocable living trust offers a wide range of features and benefits that can help you reach the goal of securing your family’s financial future. If you would like more information about how a revocable living trust can be shaped to your financial goals and needs, call upon us at any time.

© 2015 M.A. Co. All rights reserved.

John M. Bonk Joins Garden State Trust Company

John joined the Lebanon, New Jersey Office of Garden State Trust Company as a Senior Vice President and Trust Officer in January 2017 where his knowledge and expertise, drawn from a career of over 40 years in the Trust and Investment Management Business, focused on Estate and Trust Planning and Administration, Retirement Planning as well as Philanthropic Planned Giving strategies and administration.  John will help Garden State Trust Company to expand our Investment and Fiduciary Service business in the New Jersey Marketplace. 

Prior to joining Garden State, John was with Peapack-Gladstone Bank for 18 years asSenior Managing Director of Wealth Management supervising the Wealth Advisory Trust and Business Development Group.  Under his direction, the Trust Division saw the assets under administration swell from $600 million to over $3 billion.  He was also instrumental in the establishment of the PGB Trust & Investments – Delaware trust subsidiary.

He started his career in Plainfield, New Jersey at United National Bank, later known as United Trust in Bridgewater, NJ.  A Senior Vice President and Trust Division Head, John had managerial responsibility over the investment, administration, tax and new business aspects of the $1.7 billion Trust Department including Chairman of the Officer’s Trust Committee and a member of the Plainfield Foundation.  John graduated with BS in Business Administration from Concord College and received the Professional Designation of Certified Trust and Financial Advisor (CTFA) from the American Bankers Association.

John serves as Trustee of the Lowell F. Johnson Foundation, Trustee of Hillside Cemetery Association and previously on the Boards of The DuCret School of Art, American Federation for Aging Research (AFAR) and on the Planned Giving Advisor Boards of Muhlenberg Hospital  Foundation, The Hunterdon Healthcare Foundation and Hunterdon Museum of Art.

John’s experience and approach to providing fiduciary, administrative, trust, investment and tax services in a coordinated manner will enhance the delivery of optimum results for existing and new trust relationships going forward.

2016 IRA Deadline Approaches

If you haven’t yet made an IRA contribution for 2016, there’s still time to make one, until the tax filing deadline. Taxpayers have until Tuesday, April 18, 2017, to file their 2016 returns and pay any taxes due. The deadline is later this year due to several factors. The usual April 15 deadline falls on Saturday this year, which normally would give taxpayers until at least the following Monday. However, Emancipation Day, a D.C. holiday, is observed on Monday, April 17, giving taxpayers nationwide an additional day to file. By law, D.C. holidays impact tax deadlines for everyone in the same way that federal holidays do.

If you already have made your 2016 contribution, it would be financially wise to go ahead and make one for 2017.  That will give your account an extra year of investment returns.  The contribution limit for each year is $5,500.  Those who are 50 and over may make an additional “catch-up” contribution of $1,000.

The deduction for IRA contributions phases out for those higher-income taxpayers who also are covered by an employer’s retirement plan.  The phase-out range was bumped up slightly for 2017 contributions, as shown in the table below.

IRA deduction thresholds

Taxpayers below the threshold may take a full deduction for their contributions to traditional IRAs.

IRA deduction thresholds

Source: IRS Notice 2016-141

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $186,000 and $196,000 in 2017, up from $184,000 and $194,000 in 2016.

(March 2017)

© 2017 M.A. Co.  All rights reserved.

UPDATE: Michael Jackson’s Estate

More than seven years after his death in 2009, controversy continues to plague Michael Jackson’s estate.  The remaining problem, and it’s a big one, is the federal estate tax.

Jackson’s reputation was at a low point when he died, and his debts totaled half a billion dollars. His executors valued his name and likeness at just $2,105, and they tallied the total net estate at $7 million.  We don’t know what their reasoning was, but given the enormous size of Jackson’s debts, some observers at the time expected the estate to be bankrupt.

The IRS disagreed on the valuations.  Most importantly, the IRS figured that Jackson’s celebrity value was an astounding $434 million, which contributed to a total estate value of $1.3 billion!  Taxes and penalties could have run to $700 million.  Negotiations between the estate and the IRS have been ongoing since 2013, and the Service reportedly has backed off on the celebrity value, down to $161 million.

Even that figure is completely unrealistic, according to the lawyer for Jackson’s estate.  That is a far higher value than any other celebrity identity ever has commanded, and it is far more than Jackson himself earned from his celebrity (as opposed to his music) during his entire life!

The evidence that the estate low-balled the value of Jackson’s assets comes from the fact that the executors have netted about $1 billion for the estate during the period of administration.  This includes music sales, the documentary “This Is It,” a Cirque du Soleil tribute show and the sale of Jackson’s 50% stake in Sony/ATV Music Publishing.  They have paid off all of the debts owed at Jackson’s death and now have roughly $500 million for his heirs.

But there is still that estate tax to be paid, and a trial on the valuation began in February. The tricky question presented is, how much were Jackson’s assets worth at the moment of his death?  Without the skilled work of his chosen executors, they most likely would have been worth nothing at all.  How much of the success of those executors was foreseeable at Jackson’s death?  Certainly, he left them a lot to work with.  But was the surge in popularity of Jackson’s music and image foreseeable when he died?

This is a case for the record books.

(March 2017)

© 2017 M.A. Co.  All rights reserved.

Sean Rice Promoted To Vice President and Trust Officer

Sean Rice, having achieved the status of Certified Trust and Financial Advisor (CTFA) has been promoted to Vice President and Trust Officer of Garden State Trust Company.

CTFA is a distinguished professional credential offered by the American Bankers Association. It is the recognized standard of excellence for trust and wealth management professionals. Mr. Rice attended the Cannon Financial Institute and successfully completed the comprehensive three-year program.

Including Sean, the company currently has 5 CTFAs on staff. The other individuals include: Kurt Talke and John M. Bonk, Lebanon Office and Siobhan Connolly and Adam Brower, Toms River Office.

Garden State Trust Company is a premier New Jersey independent trust company providing investment management, trust and estate services, and elder care solutions for retired and soon-to-be retired individuals.

Adam Brower Promoted To Vice President and Trust Officer

Adam Brower, having achieved the status of Certified Trust and Financial Advisor (CTFA) has been promoted to Vice President and Trust Officer of Garden State Trust Company.

CTFA is a distinguished professional credential offered by the American Bankers Association. It is the recognized standard of excellence for trust and wealth management professionals. Mr. Brower attended the Cannon Financial Institute and successfully completed the comprehensive three-year program.

Including Adam, the company currently has 5 CTFAs on staff. The other individuals include: Kurt Talke and John M. Bonk, Lebanon Office; Siobhan Connolly, Toms River Office and Sean Rice, Cherry Hill Office.

Garden State Trust Company is a premier New Jersey independent trust company providing investment management, trust and estate services, and elder care solutions for retired and soon-to-be retired individuals.