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, and so on); management (custody plus investment advice); and full management (the bank takes over and acts as the sole trustee). You can switch services at will, electing "management" while traveling abroad, perhaps. In later years, you might pick "full management" to avoid making portfolio decisions. You could, of course, cancel the whole deal at any time; the trust is irrevocable only upon death.

The variable trust provides service, but no present tax savings. It's well worth a look, however.

Interested inThe Rewards - and Risks - in "going Short"?

A Limitation

Thus the big selling point for giving securities to your child via a simple, streamlined "custodian account" is that you not only sidestep a formal trust arrangement, but also have a chance to save taxes. But be aware of another limitation that applies on the tax-saving side.

When you give to a minor using a custodian account, you can still split family income down to the child's lower tax bracket. But depending on how you set up this kind of account, you may be in danger of losing an important estate tax advantage. The Tax Court now supports Internal Revenue and says that you may not appoint yourself custodian of the account in the child's name - and still have the gift stay outside your... see: A Limitation