The "sprinkling" Of Wealth

Estate advisers lately have been focusing on discretionary trusts - those that give wide latitude to the trustees. They point to some clear advantages. For example, with a "sprinkling" trust the trustee can distribute income and principal to members of the family at his discretion - depending on their needs at the time. Two major points:

- When both parents die, the trustee can divide family wealth among the children without making equal distributions. The children, whose own wealth may vary a lot, may be much better off than with the traditional even split. "We're getting away from the ironclad even split - and it makes sense," says Chase Manhattan Bank's top trust officer, James North.

- When a husband dies and there is more trust income than his widow needs, the extra income can be sprinkled among the children so that it drops down into the lowest tax brackets in the family. Income taxes are cut accordingly.

In discuss ating the idea with an adviser, check on the new law that boosts income taxes where money is accumulated in a trust. This needs extra planning.

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The Flexible "fixed-income"

Have you thought about the highly flexible "fixed-income" trust? Some advisers currently are recommending it. Here's the idea: Instead of the more usual trust that has income going to a man's wife for her lifetime, then to the children for a period of years, and finally outright to the children, the husband says to the trustee: "Pay a fixed sum to my wife each year - and if the income falls short of this liberal amount, then you may reach into the principal."

In effect, you tell the trustee to sell off some of the securities - if necessary - to obtain capital gains for your widow's use. If invading principal worries you, an adviser will likely point out that these days many persons, with... see: The Flexible "fixed-income"