Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, June 7, 1993 TAG: 9306060010
SECTION: BUSINESS PAGE: MONEY EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
In another situation, maybe you'd like to winter in Florida without worrying about financial details back home. Maybe you fear a potential disability or just becoming forgetful about paying important bills.
Perhaps you'd like to get a jump on estate planning.
Trust departments operated by most commercial banks have expanded well beyond their traditional role of administering and settling estates.
Despite that, Robert L. Bradshaw Jr., senior vice president at NationsBank trust services in Roanoke, said estates still comprise most of his department's work for individuals.
People come to bank trust departments because they offer some advantages over individual executors, he said.
At a bank, specialized financial services are conducted routinely every day, he noted. Meanwhile an individual executor is wondering what to do and how to start.
Bradshaw said people write wills naming a spouse as executor. Ten years pass and the spouse may no longer be able to handle the burden. Or naming one child as executor may create problems among siblings.
Having such matters handled by a trust department, on the other hand, offers continuity, permanency and expertise, he said.
But not everyone needs the same level of help, Bradshaw said. "It depends on the nature, value and complexity of the assets."
Anyone with a closely held family business to run needs expert estate administration, he said. An ongoing trust can keep the enterprise in business.
To warrant professional management otherwise, he said, the estate should have at least $200,000 in investable assets. That is in addition to the value of a home passing directly to a surviving spouse.
Meanwhile, living trusts are growing in popularity. These are trusts created while the owner is living for his own purposes or to benefit another person.
To warrant creation of a living trust, Bradshaw said $200,000 to $300,000 in investable assets should be available.
Despite how large that may seem, many people have that much money from the payment of life insurance policies, retirement plans, roll-over IRAs and other routine investments, according to Bradshaw.
For this much money, he said, people can benefit from active management as opposed to placing the funds in a certificate of deposit. It's possible, he said, to earn a significant return on pension dollars while deferring income taxes.
Some situations justify professional handling for trusts or estates of lesser amounts, he said.
A beneficiary might be a minor, he said. Or a parent may be reluctant to turn over control of large sums to a child who is only technically an adult at 18. Or the heir may suffer from a mental or physical impairment.
Parents may not have much money now, he pointed out, but they may carry life insurance equivalent to three or four times their annual salary. Thus their estates will have significant assets.
Many older people want to travel, he said, and they turn over to a trust department handling of their investments and paying of their routine bills.
Other people might live alone in retirement and worry about becoming disabled or forgetful. The trust department can provide the same services to these people.
Bradshaw said the trust department routinely creates portfolios for specific people. A trust for a young person looks much different from the conservative investments for a 75-year-old.
Bradshaw said the charges vary with the size of assets under management. The higher the amount of assets, the lower the percentage charge. The usual annual fee for management, he said, is three-quarters of 1 percent to 1 percent of the assets.
Bradshaw said that compare favorably with management charges by mutual funds. And there is no up-front fee as there is with so-called load funds. He added that trust departments collectively have an excellent record for earnings on their funds.
He said that record is comparable to mutual funds, while the return is higher than insurance companies and many financial counselors achieve.
In addition, he said, trust departments, unlike mutual funds, assign an account officer to provide continuing individual service to each customer.
"We have a good track record on creating value," Bradshaw said.
by CNB