The Indian Giver's Trust

It takes a long time for any innovation to make the grade in the field of estate planning. But in the last five years it has become clear that the revocable "living" trust really has come into its own. With a revocable trust, you transfer property to your family without using a will. This feature - avoiding probate - has picked up interest. It will save your heirs delay, red tape, and some money. But there are other, even sharper advantages to look into. You save no income taxes because you can cancel the trust at any time - but the right to cancel, in itself, can be a prime advantage. "On balance," says James North, Chase Manhattan's top trust man, "the revocable trust is an exceptionally smart way to work an estate plan."

Under one method, you use a professional trustee (bank, solicitor, etc.), and transfer to the trust some income-producing property. The trustee pays you the income, manages the assets. He charges an annual fee of less than one-half of 1% of portfolio market value - less than that charged by an investment service. (In some cases, the fee is as low as one-fifth of 1%.)

When you die, the trustee automatically carries out the terms of the trust on behalf of your family. None of the red tape involved in the probating of your will delays distribution of your bequests. Note especially: During your lifetime, you can add property to the trust - or revoke at any time, or change managers. So, you can "test" trustees.

Another approach is a boon to high-bracket executives who expect to add to their assets through retirement benefits and insurance. Here you set up the revocable trust, but let it remain unfunded. In case of your death, any future assets become payable to the trust. You name the trust as beneficiary of your personal life insurance payoff and company retirement benefits. Again, there's no question that probating your will might delay the operation.

You can, in your lifetime, make the revocable trust irrevocable. If you do this, you pick up income tax advantages: for instance, splitting off income and putting it into a child's lower tax bracket. In any case, the trust becomes irrevocable when you die. And if it operates through two generations - say during the lives of both your wife and your children - there can be some sizable estate tax savings.

That such a trust lets your heirs avoid probate is indeed a point. Probate can sometimes be a costly courthouse routine. You may have other reasons for avoiding probate: For instance, you may fear bequests could stir up a contest over your will; you may want your assets shielded by the privacy of a trust, which unlike a will isn't on public record. The net saving in money, though, is not likely to be all-important.


The Variable Variety

One of the hottest items today is the variable trust. "It gives you more flexibility than anything in this field of planning," says top trust man Robert Ferguson, the highly regarded trust officer with FDS. In London, trust officials agree, and some see a possible trend. The basic idea is to put a reasonable percentage of your securities into a revocable trust, with you and a bank serving as co-trustees. Many banks will now take smaller accounts; so you could put in, say, £25,000, and if the idea worked well, add more in future years.

The bank provides three stages of service: custody (your securities are kept safe, coupons are clipped, dividends collected,... see: The Variable Variety