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Trust & Investment Services Overview

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Trust Investment Services for you and your family 2 0 2 2

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Trusts Now more than ever Tools for sound wealth management are within your reach The extraordinary events of 2021 may be followed by equally unprecedented developments in 2022 The stock markets boomed but that optimism has to be tempered by the greatest experience of inflation in a generation Inflation the great enemy of retirement income management must be taken into account in investment and trust planning Because you can t know the future you need a plan and a partner to meet it with confidence come what may That plan should include trust services and we should be your partner for implementation This guide summarizes the services that we offer and how because we are already bound by the strictures of fiduciary duties you your family and your beneficiaries may benefit You ll find that today s trust services can help you organize and manage your wealth in more ways than most people realize Please call upon us at your earliest convenience to learn more Contents Investment management account 2 Living trust 3 What to look for in your trustee 4 Trust protection for a surviving spouse 6 Business succession planning 7 Common trusts uncommon benefits 8 Special needs trusts 10 IRA rollovers 11 Asset protection for your grandchildren 12 Estate settlement 13 Charitable trusts 14 Our invitation to you 16 2022 M A Co All rights reserved 1

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How to keep emotions out of investment decisions Financial markets are volatile and certainly for short periods unpredictable Within that volatility lies the potential for superior performance as well as the risk of loss when mistakes are made Investors sometimes have a way of letting their emotions get the better of them which can lead to disappointment The foundation of all of our services is investment planning an emotion free process for positioning a portfolio for success in a variety of financial and economic environments Asset prices do not move up or down in lockstep When stocks rise bonds may fall Or at other times bonds also may rise when stocks do The movements of each asset class can be mathematically correlated to the movements of the other classes Portfolio optimization involves the application of these relationships to the investor s holdings We begin developing your asset allocation plan by listening We need to understand your objectives for your account your income requirements and tax status your time frames and your attitude toward risk With that information in hand we can present an investment strategy for your approval Investment Management Account BENEFIT Full time supervision of your portfolio When you open an Investment Management Account with us we draw upon our sources of research and analysis to manage your money In a sense we become your institutional investor which helps to avoid the pitfalls of reactive emotional investing The buy and sell decisions that we make for your account or if you prefer the recommendations submitted for your approval represent our independent judgment of the best course of action for your portfolio given your objectives risk tolerance and the market outlook 2 To open an account you sign a simple agreement designating us as your agent and deliver the assets that you wish us to manage You continue to own your securities and you may add or withdraw funds or terminate your account at any time Living Trust BENEFITS Now and future management for family funds continuous financial protection probate avoidance Similar in its immediate benefits to an Investment Management Account a revocable living trust offers added long range planning advantages Because we act as your trustee rather than merely as your agent you may arrange to have us take on broad responsibilities for managing your financial affairs From a practical standpoint each trust client has just as much investment control as he or she wishes Typically we provide professional management or investment guidance tailored to each client s needs and preferences Some of our clients start off by managing their trust investments themselves reserving the right to delegate investment responsibility to us in the future Our role is clear We follow the client s instructions as set forth in the written trust agreement consistent with all applicable laws and fiduciary duties There is no doubt that the client stays in control Any client who becomes dissatisfied with our service is free to terminate the trust or change trustees Beyond control over the trust our clients gain better control over their lives a type of control that only a trust affords In case of incapacity No one can escape the risk of an incapacitating illness or injury When that occurs others necessarily must take control of your finances A living trust can allow the trustee to act on your behalf The trust agreement can spell out the ground rules how you want things handled Without a trust it s the Probate Court that decides who takes over in the event of incapacity And then the ground rules are set forth in the law 3

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Financial privacy Revocable living trusts make a highly adaptable framework for long range family security planning Any trust provisions that might be made for your family by your will can be made through a living trust However unlike a will a living trust agreement normally does not go on public record at a person s death Family privacy is preserved What to look for in your trustee BENEFIT Trusted advice from a qualified professional Perhaps the single most important factor in the ultimate success of a trust based wealth management plan is the choice of fiduciary A wide range of capabilities is required for the effective discharge of a trustee s responsibilities By law and subject to the specific terms of the trust document the trustee may have remarkable power over the fate of the family fortune Trust creators need to have confidence that such power will be exercised wisely There are many important built in benefits to choosing a corporate fiduciary such as us as your trustee For example We treat estate and trust administration as a full time job We have facilities and systems for asset management that individuals lack Trust funds in our care are doubly protected both by internal audits and regulatory oversight by state or federal officials We have an unlimited life while an individual may die become incompetent or just disappear We bring long experience and group judgment to the job of investment management We will treat beneficiaries impartially and most beneficiaries will appreciate that We can withstand pressure when a wayward beneficiary asks to bend the terms of a trust while an individual trustee might give in to requests for more 4 Quick Comparison Which of our two money management services is better for you The answer depends on whether you simply want current investment Investment supervision or seek long term Management Living family protection as well Account Trust Professional full time supervision for your invested funds YES YES We act on your behalf or submit recommendations for your approval as you prefer YES YES Collection of income recordkeeping and periodic reports YES YES Freedom to change your instructions or cancel the service YES YES Lifetime protection making it possible for us to use income and principal for your benefit pay bills and attend to other financial matters in the event of your incapacity NO YES Continuity of service for the benefit of others following your death without probate delays NO YES Reduction in expenses relating to settlement of your estate NO YES Opportunity to save estate taxes at death of surviving spouse or other beneficiaries you have named NO YES 5

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A Partial Checklist of Fiduciary Duties How do the investment responsibilities of trustees differ from those who are not considered fiduciaries under the law The American College of Trust and Estate Counsel a professional organization of lawyers dedicated to improving probate and trust practices created What It Means to Be a Trustee A Guide for Clients The Guide notes that the following obligations are imposed upon the trustees of most trusts Duty of skill and care Duty to give notices Duty to furnish information and to communicate Duty to account Duty not to delegate Duty of loyalty Duty to avoid conflict of interest Duty of impartiality Duty to invest Duty of confidentiality of its income to the surviving spouse at least annually With the traditional marital deduction trust the spouse also has the power to alter the ultimate disposition of trust assets typically through specific instructions provided in his or her will Qualified Terminable Interest Property Trust QTIP trust However the spousal power to direct the trust assets isn t mandatory for the marital deduction For example in a second marriage situation a QTIP trust might pay its income to the surviving spouse for life and its principal to children from the first marriage at the spouse s death Qualified Domestic Trust QDOT When the surviving spouse is not a U S citizen this special form of trust must be used to secure the marital deduction A QDOT pays all its income to the surviving spouse and may in certain circumstances be subject to U S transfer taxes before the death of the surviving spouse Business Succession Planning BENEFIT Keeping a family business in the family Trust Protection for a Surviving Spouse BENEFIT Lifetime income free from investment management concerns A trust for your spouse if you re married can provide reliable financial support if he or she survives you With a trust professional investment management is built right in an important consideration if the beneficiary lacks investment expertise Generally speaking there are three approaches to be considered Traditional marital trust To qualify for the federal estate tax marital deduction a trust must pay all 6 Questions about succession planning will come up quite naturally when business owners are doing their estate and retirement planning When key employees need to be retained ownership and succession matters are again likely to be put on the table Among the early questions to be addressed Who will be available to succeed to management Do they already have the necessary skills and training What will be the cash flow needs of the business at the founder s death What impact will the founder s death have on the value of the business What will be the cash flow needs of the founder s estate at his or her death How will those needs be met What role will nonfamily members play in the succession 7

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Ordinary Trusts and Their Uncommon Benefits No two trusts are exactly alike Here are representative samples of what can be achieved with a trust Beneficiary Yourself Your spouse Type of trust or account Tax benefits Other benefits Revocable living trust None Professional asset management continuous financial protection upon incapacity Avoids probate in many states Investment management account None Easy to set up gain perspective of investment professionals Marital deduction trust Full estate tax deferral in most cases Spouse receives all trust income at least annually may direct ultimate distribution of trust assets Qualified domestic trust Full estate tax deferral Spouse must receive all trust income Qualified terminable interest property trust QTIP trust Full estate tax deferral Especially appropriate for blended families Children s interests normally can t be changed by spouse Bypass trust No federal estate tax possibly for decades Surviving spouse may also be a beneficiary Spendthrift trust None Trust assets are protected from the beneficiary s creditors Special needs trust None May provide for enhanced quality of life while permitting continued government benefits Grantor retained annuity trust GRAT Income and estate tax savings Grantor s retained interest reduces gift tax exposure Assets may be removed from estate taxation Charitable remainder trust Income gift and estate tax deductions Income interest may be a percentage of the trust s value or a fixed dollar amount Your family Your favorite charity plus yourself and or family members 8 9

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A trust can be a particularly useful mechanism for providing ownership across several generations The trust may hold investment assets as well as the business interests A corporate trustee can handle trust administration providing custodianship and investment management as well as fiduciary supervision of the trust When some family members participate in the business and others do not a trust may provide a mechanism for balancing interests and addressing conflicts without rancor or bias Special Needs Trusts BENEFIT Lifetime supplement for someone with a disability Parents and grandparents of a child with a lifelong disability such as autism have a special estate planning challenge On the one hand they want to provide the financial support that the child never may be able to provide for himself or herself On the other hand they want to protect the child s eligibility for the full range of government support programs including health care Distributing assets outright to a special needs person is likely to result in a disqualification for government benefits Completely disinheriting the child is not a good idea because government benefits alone may not be enough Giving property to other family members with the understanding that it will be used for the benefit of the special needs person may work for some families but there are risks For example such assets will be vulnerable to creditors including potential ex spouses should there be a divorce 10 The better course for many families is to establish a third party special needs trust A first party special needs trust is one established for oneself with one s own assets The assets of first party trusts must be used to repay state Medicaid agencies that have paid for medical services No such requirement applies to third party trusts that are created for others This is a complicated area of law and the rules vary from state to state so the advice of a lawyer well versed in special needs trusts will be essential When special needs trusts are administered by a corporate trustee such as us the assets receive professional management and the beneficiary receives continuous financial protection IRA Rollovers BENEFIT Tax deferral and careful management of retirement capital If you will be receiving a lump sum distribution from a 401 k plan or other employer provided qualified retirement plan you have some important tax planning ahead You can defer income taxes often for many years or even decades by rolling the lump sum into an IRA Most retirees will find an IRA rollover to be to their financial advantage Should you decide to take this approach arrange for a trustee to trustee transfer to avoid the 20 withholding tax that otherwise applies to lump sum distributions Roth IRAs Another important consideration is the conversion of an IRA to a Roth IRA Ordinary income tax will have to be paid on the amount converted but subsequent investment income may be free of further taxation What s more there are no required minimum distributions for Roth IRA account owners in contrast to ordinary IRAs 11

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Asset protection for your grandchildren BENEFIT Provide beneficiaries with more than a simple bequest An inheritance might need protection from any number of dangers Simple financial immaturity and lack of investment experience for example The temptations of luxurious living Addictions Attacks by scam artists Well intentioned but poorly planned business ventures Claims by creditors notably ex spouses An inheritance in trust provides a barrier to financial misjudgment even as it delivers professional investment management of assets The trust principal may be distributed to the beneficiary over time on a planned schedule so much at age 25 age 35 age 45 and so on or upon the occurrence of specified events completion of education marriage or the beginning of a professional practice for example Or these distribution decisions can be left to the discretion of the trustee A trust may transform an inheritance into a lifetime resource for financial security Here are examples of trusts that protect an inheritance Gifts to minors trust For children who are minors contributions of up to 16 000 per year to this account will avoid gift taxes A married couple may together set aside 32 000 each year for each child so in a few years a significant source of capital may be built up Assets may be used for any purpose including education funding and must pass to the child when he or she reaches age 21 Spendthrift trust The beneficiary is forbidden to transfer any financial interest that he or she has in the trust and may not compel distributions 12 Discretionary trust The trustee has sole discretion over what to do with trust income or principal so that the beneficiary has no interest in the trust that can be transferred Support trust The beneficiary s interest in the trust is limited to so much of the income as is needed for support education and maintenance These are but starting points to begin a discussion of the benefits of a trust based financial plan Wealth protection trusts need to be tailored to the unique requirements of the family to be served Estate Settlement BENEFIT Prompt implementation of will provisions meticulous attention to details Everyone who owns property needs a will If a valid will is lacking a probate estate must be distributed according to the unbending laws of intestacy a distribution that may bear little relationship to actual family needs or desires Unfortunately many individuals leave an unrecognized weak point in their wills Spouses relatives or business associates are designated to fill what is presumably the mostly honorary post of executor or personal representative In reality estate settlement involves a demanding complex set of tasks and the results for better or worse depend upon the experience skills and judgment of those you designate to handle the job The executor or personal representative you name in your will is responsible for safeguarding the assets of your estate for paying proper debts for contesting improper claims for collecting sums owed the estate and for filing estate and income tax returns Your executor must decide what to sell and when to pay taxes and estate expenses and what to hold for distribution to your beneficiaries or to trusts that you establish for their benefit 13

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In less complicated times people relied on close relatives or friends to settle their estates Today naming an inexperienced executor is not only shortsighted but also potentially costly The characteristics of an ideal executor or personal representative include Financial responsibility Unquestioned integrity and freedom from personal bias Patience and sympathy Experience in caring for all types of assets and holdings Informed investment judgment Familiarity with special tax questions that arise when an estate is settled Immortality What if your executor dies before you do or before completing the settlement of your estate We provide specialized skills in all phases of estate administration As your executor we re sure to be on hand when needed and no relative or family friend could hope to match our experience and facilities Yet our fees for estate settlement are no greater than inexperienced individuals might be entitled to receive Charitable Trusts BENEFIT Harmonize philanthropy and family financial protection objectives Charitable trusts long have been an important part of estate planning With trusts the benefit of owning securities or other assets can be split into two parts present and future One or more income beneficiaries can be given the immediate benefit of ownership in the form of periodic payments from the trust These income payments can last for a specified number of years or for a beneficiary s lifetime 14 Agent for executor or trustee Because many people are unfamiliar with the complexities of estate settlement especially for larger estates they may name a family member as executor of their wills or as trustee for trusts created for the long term preservation and management of family wealth Once an individual has accepted the office of executor or trustee he or she may quickly learn that there is quite a lot to do on the job We can provide agency services to give the individual crucial support Such services may include recordkeeping investment management tax planning and return preparation accounting and reporting discretionary distributions in accordance with the trust agreement Our role in such circumstances can be tailored to meet the needs of the situation We can take on just as much work as is wanted to get the estate settled or to keep the trust functioning smoothly no more and no less One or more remainder beneficiaries can receive the income producing assets in the future when the required income payments have been completed Both the right to receive trust income and the right to receive a trust s remainder interest can be valued for the purpose of granting income tax deductions and also for the purpose of figuring gift or estate tax There are many possible variations of charitable trusts each with important income gift estate and generation skipping transfer tax consequences The key to using today s charitable trusts successfully is to design an approach tailored to your own particular set of charitable intentions and family financial planning objectives 15

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Trust Investment Services for you and your family 2 0 2 2