Trust Services - Topics of Interest

• Choosing Your Trustee
• The Estate Tax Basics
• The Importance of a Will
• The Revocable Living Trust
• Charitable Trusts

The two most important qualities for a Trustee are experience and investment skills. THE National Bank has professional trust officers with years of training and experience available to provide you with quality trust services. We are familiar with Revocable Living Trusts and probate matters, as well as how to maintain an investment portfolio that is right for you.

• Collect all your Trust income
• Distribute the income or reinvest it, as directed by your Trust document
• Maintain complete and accurate records for all transactions
• Prepare a tax summary to be presented to the tax preparer
• Keep your assets safe in our custody
• Make investment decisions for your assets
• We will work closely with you to be sure that the investment plan meets your specific needs and objectives.

Your assets will be closely monitored and reviewed by our trained staff and all activity will be reported to you on the regular trust statements that we provide.

The Trustee's most important job is to follow your instructions as detailed in the Trust document. THE National Bank will be impartial to all your beneficiaries, while making decisions and following your instructions. We are full-time professional trustees available to you and your family to assist with your needs. Please call Kirk Metzger or Larry Dellitt at 309-755-0671 to discuss your needs, or e-mail us at trust@thenb.com.

^ top ^

• Your personal belongings, household goods and automobiles
• Amount you have on deposit in savings and checking accounts
• Market value of stocks, bonds, and other securities
• Real estate owned
• Debts others owe to you
• Any partnership or proprietorship interests you possess
• The proceeds of life insurance policies on your life if you possessed any "incident of ownership" at your death
• The value of any insurance policies you own on the life of another person
• Your interest in your retirement plans and IRA's
• The value of any annuity you own that will continue to be paid to another beneficiary after your death
• The value of property over which you possess a "general power of appointment"
• The value of jointly held property except that part, if any, that was contributed by the joint owner/survivor.

• Administration and funeral expenses
• Claims and bills against your estate, such as valid debts you owe and unpaid property or income taxes
• Charitable deductions for the value of any real or personal property donated to a qualified charitable organization. If you donate your entire estate outright to your favorite charity or charities, your executor may claim a charitable deduction for the full value of the gift, thereby eliminating any federal estate tax.

What tax does your estate owe?
When you die the value of your taxable lifetime gifts is added to your taxable estate. The unified rate, or tax rate, is applied to this total to get a "tentative" tax. From that, any gift taxes you have previously paid are subtracted. The result is the estate tax to be paid.

The Unified Credit
The unified credit is an amount that eliminates or reduces estate tax. A unified credit applies to both the gift tax and the estate. In 2001 the unified credit was $220,550, which was sufficient to eliminate taxes on an estate of $675,000. The following table shows the unified credit and the applicable exclusions amount for the calendar year in which a gift is made or a decedent dies.

After year 2009, the unified credit returns to the 2001 limits unless congress votes to make permanent changes.

The Marital Deduction
The rules are complex, but generally your estate may deduct the value of all property passing from you to your surviving spouse in "a qualified manner". Therefore, if you have a simple will bequeathing all your property outright to your spouse, YOUR estate will pay no federal estate tax. However, this may not be the best manner in which to handle both estates, as your assets as well as your spouse's will be taxed upon the death of the second spouse. This could easily put the estate into a higher federal estate tax bracket.

One method used to help eliminate this is that the tax law permits you to place the property in a trust for the benefit of your spouse and still secure the marital deduction. The specific requirements are 1) that the net trust income must be paid out to the surviving spouse at least as frequently as annually and, 2) your spouse must be given "general power of appointment", which means your spouse may determine who is to receive the property at the surviving spouse's death.

This is the basic use of the Marital Deduction although with detailed estate planning, other techniques are available. They all are very specific and can be very beneficial at reducing overall estate taxes for a married couple.

Also used is the A/B trust. This is a two-trust estate plan. Essentially, a two-trust estate plan works like this: When you die, your estate is divided into two parts. One part is a trust that qualifies for the estate tax marital deduction. The trustee holds and manages the property for the benefit of the surviving spouse. This is the "A Trust". Again, the net income must be paid out to the spouse at least annually and principal is available for the surviving spouse as they wish.

The "B Trust", called the residuary trust, generally distributes income to the surviving spouse at least annually. However, the ability of the spouse to receive principal funds must be limited. The Trustee is charged with the discretionary power to distribute trust assets, or principal, to or for your surviving spouse for specific needs. This is what protects the B Trust from taxation at the surviving spouse's death.

Note the difference between the distribution methods for the principal assets of the A and B Trusts. When the surviving spouse dies, the funds remaining in A Trust will be included in the taxable estate; however, the funds remaining in B Trust will not be included in the surviving spouse's taxable estate.

• Protect your assets against inexperienced management
• Generate trust income that not only meets your spouse's needs but also may increase trust assets over time
• Relieve your spouse of the burdens of recordkeeping and the other day-to-day tasks involved in managing assets and bill paying
• Provide professional asset management for your children and/or grandchildren until they reach the age at which you and your spouse desire for them to receive their inheritances.

Whether the A/B trust estate plan is right for you and your family depends on your individual needs and objectives. We would be happy to tell you more about two-trust estate plans and other estate planning techniques that may help you and your family. Give Kirk Metzger or Larry Dellitt a call at 309-755-0671.

^ top ^

What is a Will?
A will is a legal document in which you detail who is to receive your personal property and investments upon your death. The presence of a will at any individual’s death allows you to dictate who is to receive your assets. This eliminates distribution decisions being made by the state in which you reside. Obviously what the state dictates by law, may not be what you personally prefer.

It is beneficial for you and your spouse or other family members to meet with a trust officer at THE National Bank to discuss your goals and objectives for distribution of your assets. An attorney of your choice will prepare the Will according to your wishes, in the legal format that meets applicable law. It is then the Executor's responsibility to follow your wishes "to the letter".

Distribution of your Property
You control the ultimate distribution of your property and the timing. You decide who is to get what and when.

Choosing the beneficiaries of your estate requires careful thought. If some or all of your children are minors, you are able to leave their share of your estate in trust for them, which is called a Trust Under Will. This would provide for their financial care and support until such age as you state in the will. The Trustee would be responsible for meeting with the guardian of the child to determine the financial needs of the child. With the Trust Under Will you are assured that your minor children are cared for financially.

Many people think that if they own property or investments with a joint owner that there is no need for a Will. However, if the joint owner dies before you die, then no beneficiary exists and you die "intestate". Intestate means that the law of the state in which you are domiciled governs the distribution of your property. Those laws may dictate distributions to beneficiaries that you do not want included in your estate plan. Complications can also arise if you own real property in other jurisdictions.

Naming a Guardian for Minor Children
If you have children who are minors, naming a guardian in your will is very important. The guardian is the person or persons you want to raise your children. The Trustee will work closely with the guardian to be certain the financial needs of the minor children are met. Both the guardian for finances and the guardian for the personal needs of the minors will be required to file periodic reports with the court.

Reducing Estate Tax
For a discussion on how to utilize a Trust Under Will to save taxes, please refer to the section "The Estate Tax Basics".

Naming Your Executor
In your Will, you name someone to serve as your executor, as well as a successor executor in the event the primary executor is unable to assume the responsibilities on your behalf.

• collecting, managing and securing all assets
• notifying creditors and paying all valid debts
• selling estate assets to have funds available for debt payment
• collecting any sums owed to the estate
• keeping detailed records of all receipts and disbursements
• filing necessary Court reports
• keeping beneficiaries properly notified, both through meetings and by written detailed accountings
• distributing assets to the proper beneficiaries
• filing all required tax returns

As you can see, the duties are numerous and varied. Therefore, many of our clients choose to appoint THE National Bank to serve as Executor under their Will. Our Trust Officers have many years of training and experience in the matter of settling estates, and we would be pleased to speak with you privately. Please call Kirk Metzger or Larry Dellitt at 309-755-0671.

Reviewing Your Estate Plan
The Will you have in place today may not be exactly what you want in the years ahead. Many life changes affect the provisions you have in your Will. Please be sure and review your Will at least every five years, or at any time you have a significant life event. You may want to make a simple amendment, or replace the will entirely, depending on the circumstances.

^ top ^

What is a Revocable Living Trust?
A Revocable Living Trust is a legal agreement between three parties. The first person is the Grantor - or the owner of the Trust; the second being the Trustee, who holds and manages the property in the Trust; the third is the Beneficiary, the person who benefits from the Trust either immediately or at some point in the future.

The word "Living" is used because the Trust is created and effective during your lifetime and may extend beyond if you so desire. Many Grantors create the Trust early in life and name THE National Bank to serve as Trustee.

This is the beginning point for many estate planning clients. The Revocable Living Trust gives the ultimate in flexibility for the Grantor (owner). The Grantor controls every aspect of the trust provisions and changes may be made as life circumstances or preferences change.

• ask the Trustee to do more work for you
• ask the Trustee to do less work for you
• make changes regarding the beneficiaries who will receive property or funds
• deposit more money or securities to the trust
• remove any or all money or securities from the trust
• or cancel the trust entirely

Trusts have a reputation of being a mechanism to reduce or eliminate federal estate tax; however, the Revocable Living Trust alone does not reduce the estate tax burden during your lifetime or at your death unless it incorporates estate and tax planning techniques.

Benefits For You
Revocable Living Trusts provide significant benefits:

• The Trustee provides professional management, investment services, and bill paying if needed. The Trustee manages the investment portfolio and all matters are confidential between you and THE National Bank. Naming us as trustee assures that you will receive high quality, professional management service that eliminates the time and care that your investments demand of you. The Trust will give you peace of mind and allow you to relax financially. We keep you informed of all activity occurring in your Trust. Allowing THE National Bank to serve as your Trustee also eliminates the need for your family to be familiar with and comply with the complex state and federal trust laws.
• The Trust provides a way for the Trustee to immediately begin serving your financial needs in the event of incapacity. In the event that ever happens, your Trustee manages your investment portfolio and pay bills, all for your benefit. This immediate professional support relieves the family of the financial burden while they see to your personal needs. The Trust eliminates Court imposed guardianship which may be needed without this arrangement.
• At your death the Trust remains confidential. The Trust is not filed at the Courthouse upon death as is a Will. The Trustee continues to manage the investments and provide distributions from the Trust as you have directed in the document. Those distributions may be immediate after death or may be delayed to some point in the future. Your family maintains security that all financial matters continue without disruption.
• With few exceptions, the Revocable Living Trust avoids probate for assets that are titled in the Trust name. Therefore, the size and composition of your estate and your gifts detailed in the Trust are not public and the distribution is not delayed as with estate proceedings.

In addition to your Revocable Living Trust, you should have a Will that is called a "pour-over will". In the event one or more of your assets are not titled in the name of the trust, the Will directs the executor to "pour-over" all assets to the Trust. Those assets, therefore, are administered the same as the assets that are titled in the name of the Trust.

THE National Bank's professionally trained and experienced Trust officers would be pleased to talk with you about Revocable Living Trusts and answer any other trust and estate questions you may have. Please call Kirk Metzger or Larry Dellitt at 309-755-0671.

^ top ^

Most charitable contributions are deductible. In fact, with Charitable Trusts large donors can make contributions to a trust, benefit from the tax deductions, and also retain power over either the income or principal for the named beneficiary.

Sound too good to be true, well it's not. The IRS has continued to be kind to charitable contributors by permitting the use of Charitable Trusts. Many charitable gifts are made because they are deductible and, therefore, reduce taxes. This is the incentive for many citizens to make generous charitable gifts. For those people who want to make sizeable gifts, the use of a charitable trust could be very advantageous.

Like all trusts, the trust agreement names the Grantor (giver); the Trustee who must follow the terms of the trust document precisely, and the beneficiary. That person or organization (beneficiary) may receive an immediate benefit, or the benefit at a later stated date.

Charitable Lead Trust
Conversely, there is also a trust called the charitable lead trust wherein you donate property to the trust, and the trust gives the income to the charity and then at a specified time the property returns to a beneficiary of your choice.

• You to give now to the trust
• You to deliver the property now
• Deduct now from your taxes
• You to get the property back for another beneficiary

The use of charitable trusts is complex, but can be very beneficial for major contributors.

For more information, please call 309-755-0671 or 888-245-7025.

^ top ^

Set As Homepage | Add To Favorites | Print This Page

Avoid ATM surcharges by choosing from the following convenient locations View all ATM locations

Make Federal tax payments with EFTPS. Note that your browser will need 128 bit encryption. Visit www.eftps.gov

Get an instant credit report from several national agencies to learn about your credit. Check credit report

**THE National Bank does not endorse or guarantee the products, information or recommendations provided by linked sites and is not liable for any failure of products or services advertised on those sites.  Third party sites may have a privacy policy different than that of THE National Bank and may provide less security  than that which is provided by THE National Bank.