14 | The Summation
TRUST BANKING
Trust Banking IRREVOCABLE
Irrevocable Trusts, Beneficiaries/ TRUSTS, BENEFICIARIES/ Remaindermen, Financial REMAINDERMEN, Planning and Cash Flow Analysis
FINANCIAL PLANNING AND CASH FLOW ANALYSIS
by Sheldon F. Bernau, CPA, CGMA, CDFA will refer to an investment they have heard
Linear returns, as viewed by many when researching investment returns, are often question why the Trustee doesn’t invest in one of the contributors to a false sense of t can be traumatic when an that particular asset to generate the return security in financial planning. oftenin t can be traumatic when an individual passes away of an Irrevocable Trust gives direction to theHow Trustee individual passes away — whether needed? How do you communicate to a have we heard someone say, “if you put your — whether it’s the loss of a partner, parent, relative caring for whom the Grantor wishes to provide. One of it’s the loss of a partner, parent, relative beneficiary how you have the funds invested? money in a particular investment you can or friend. Many have lost the one who helped care the responsibilities of the Trustee is investing assets of the or friend. Many have lost the one who you demonstrate retire comfortably?” Statements this are them financially, who “heldHow thedo purse strings” ora reasonable Trust in a prudent manner (read the “Uniformlike Prudent helped care forfor them financially, who “held withdrawal rate of funds that can be drawn often made for segments of asset markets, was the one who “understood finances,” leaving the Investor Act” and the “Prudent Man Rule”) to provide the purse strings” or was the one who from the trust challenges. without compromising its fund returns, etc., and while those survivorleaving withthe additional appropriately formutual the needs of beneficiaries. Another “understood finances,” survivor unencountered long-term efficacy? The world we live in as returns have been achieved over time, the Considering these issues in advance provides an purpose is the administration of the document as directed with additional unencountered challenges. Trustees has become increasingly complex, manner or variance in which those returns opportunity to name an individual or institution to act by the Grantor. Within this duty of administration resides Considering these issues in advance provides yet these questions cangap be answered utilizing have beendistributions achieved are ofwithin much guidelines greater an irrevocable trust, to stand in the the responsibility to make an opportunityas to Trustee name an of individual or left by the decedent, and to act as fiduciary over the financial planning tools readily available. Two importance when you begin drawing of the document, which often involves discretion. off institution to act as Trustee of an irrevocable financial affairs of the beneficiaries or remaindermen. financial planning tools of great importance those is investments. of returns is why The use of discretion paramountVariance to the administration trust, to stand in the gap left by the decedent, Whether established by the maturing of a Will as a are the budget and cash flow analysis. budgeting and investment returns are of the trust document. The Grantor and attorneyalone cannot and to act as fiduciary over the financial Testamentary Trust, or through a Revocable Trust funded enough, and the variance and consistency anticipate all the not future possibilities when beneficiaries, affairs of the beneficiaries or remaindermen. during the lifetime of the Grantor, the general the purpose Determining Needs of the or not, may of portfolio are pay morefor justified requestinvestment the trustreturns account Beneficiary through Budgeting important than the overall average return. certain expenses. Beneficiaries may not have a reasonable Whether established by the maturing of a
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BY SHELDON about F. BERNAU, CPA, CGMA, CDFA that provides “X” rate of return and
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comprehension of how long the funds will last. Perhaps THE FIRST DUTIES Will as a Testamentary Trust,FOUR or through a they willisrefer toCash an investment they have My personal favorite form of budgeting Flow Analysis andheard about AND POWERS OF TRUSTEE Revocable Trust funded during the lifetime that provides “X” rate of return, and questions the “zero-based budget,” which analyzes Monte Carlo Simulation forwhy the TO FLORIDA STATUTES: of the Grantor,ACCORDING the general purpose of THE an Trustee doesn’t invest in that particular asset to generate needs annually and evaluates line items Portfolio Management Irrevocable Trust gives direction to the the return needed? How do you communicate to a for reasonableness. For those living on a Section 736.0801 Duty to administer trust. Trustee in caring for whom the Grantor beneficiary how you have the funds invested? How do relatively fixed income (i.e., there aren’t Whether the terms of a document are wishes to provide. One of the responsibilities Upon acceptance of a trusteeship, the trustee shall you demonstrate a reasonable withdrawal rate of funds virtually unlimited funds available), liberal, the assets are significant, or the administer the trust in good of the Trustee is investing assets of the Trust faith, in accordance that can be drawnbeneficiary from the has trust without compromising thisinterests is important to address early in the assets of their own that may with its(read terms purposes and the of the in a prudent manner theand “Uniform itsplanning long-term efficacy? The world we live in astoTrustees relationship. I compare financial or may not impact the decision make a beneficiaries, and in accordance with this code. Prudent Investor Act” and the “Prudent has become increasingly complex, yet theseclear: questions to the proverbial road trip where, if distribution, one truth remains There Man Rule”) to provide appropriately for Section 736.0802 Duty of loyalty.— (1)a wrong turn, the earlier can be answered utilizing financial planning tools you take you is a relatively finite amount of money that the needs of beneficiaries. Another purpose readily available. Two financial planning tools of great address and correct it, the better. can be distributed. This amount is impacted As between a trustee and is the administration of the document as the beneficiaries, a importance are the and cash flow trustee shall administer the trust solely in the by budget the life expectancy of theanalysis. beneficiary, the directed by the Grantor. Within this duty of interests of the beneficiaries. If nine hours into a 12 hour road trip you expected rate(s) of return on the underlying administration resides the responsibility to Determining the needs of the realize you took a wrong turn, the make distributions within guidelinesImpartiality. of the Section 736.0803 results could be disastrous. You Beneficiary through Budgeting document, which often involves discretion. If a trust has two or more beneficiaries, trusteeof miles in the MyBpersonal uild a plan thatform is realistic favorite of budgeting is the “zeromay bethe hundreds shall act impartially in administering the trust based budget,” which analyzes needs annually and wrong direction, and depending Utilize your assets in the most efficient manner The use of discretion is paramount toregard the property, giving due to the beneficiaries’ evaluates line items for reasonableness. For those living on your plans, might find them administrationrespective of the trustinterests. document. The etermine what is reasonable and whatvirtually is not relatively fixed income (i.e., there aren’t unachievable. The same can on a D Grantor and attorney cannot anticipate all unlimited funds available), this is important to address be said for an individual who Section 736.0804 Prudent administration. the future possibilities when beneficiaries, Generate a reasonable return wants to spend an unrealistic early in the relationship. I compare financial planning justified or not,Amay request theadminister trust account trustee shall the trust as a prudent roadneeds trip where, if you take a wrong xamine your annually because they perceive to theEproverbial would, by considering theamount purposes, terms, pay for certain person expenses. Beneficiaries may turn, the earlier you address and correct it, the better. the portfolio to be so great distribution requirements, not have a reasonable comprehension of and other circumstances Tailor to into youra needs If nine hours 12 hour road trip you realize you it won’t run out of money. of the trust. In satisfying this standard, the trustee how long the funds will last. Perhaps they shall exercise reasonable care, skill, and caution.
20 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING
took a wrong turn, the results could be disastrous. You
