May INSIGHTS from Garden State Trust Company

INSIGHTS

May 2023

IN THIS ISSUE

ESTATE PLAN ESSENTIALS

BEWARE OF FINANCIAL

FRAUD: “PHISHING”

A BLUEPRINT FOR INVESTORS: THE

INVESTMENT POLICY STATEMENT

ARTICLES OF INTEREST

This month you will see a new monthly feature following the lead article in our newsletter called Ask Garden State Trust Company, where readers can send in a question concerning trusts, estate planning and wealth management by clicking on our new dedicated e-mail link. To kick start this new feature I am using a question that was received months ago concerning a living trust so I thought it would be helpful to share a great article from one of our past newsletters about the benefits of a living trust.

Developing a sound investment management strategy is more than allocating assets and diversifying among the various asset classes. It is also about achieving your financial goals in life. The long-term security of your family is likely to be the primary goal. To attain it, you want to ensure that your assets will continue to grow--providing the income that your loved ones will need to live comfortably, should you not be able to provide for them. And one of the most valuable sources available to help you achieve that goal of long-term financial security is a revocable living trust.

A revocable living trust allows you to plan for the management of your assets both while you are alive and after you are gone. By establishing your trust now, you may be able to reduce the emotional stresses and strains that your family may experience when they are forced to make difficult financial and investment decisions after you are gone.

Think of a trust as a strong box, a place where you can transfer your securities, real estate, or other property. This transfer is accomplished by making the trust the new owner of your assets. However, you retain control while you live, and you can direct what happens to the assets after you are gone or are unable to make the necessary decisions about their management. These instructions are contained in a trust agreement that will be implemented and administered by the trustee that you name to oversee the trust.

Neither the instructions in the trust agreement nor the trust itself possess a permanent life. The directions that you give today may be altered in any way, at any time. The trust itself, if necessary, can be revoked, and your assets transferred back to you.

Your trustee will serve as the manager of the trust's investments. When you name an independent corporate trustee, such as Garden State Trust Company, we can assist you in developing the strategy that will best serve you and your family, based upon your personal circumstances. For example, we will review your long- and short-term objectives, your risk tolerance, liquidity needs, tax considerations and a host of other variables to make certain that the investment choices made match your needs and expectations.

When we assist you in planning and developing an investment management strategy, you may delegate to us in the trust agreement the authority to execute all the investment decisions. Alternatively, you can require us to submit recommendations for your approval. In all cases, as trustee, we will be responsible for all the paperwork and responsibilities associated with the management of your assets.

Here is an added benefit, and it is an important one: By setting up a living trust now and naming us to serve as your investment manager, you can "preview" our processes. By observing our actions now, you will have the peace of mind of knowing that you will be leaving a capable, knowledgeable investment advisor to serve your family later.

If you have not yet made the decision to integrate an "active" living trust into your current financial plans, you may want to look at an alternative--a standby trust.

A standby living trust offers you the opportunity to achieve a high degree of protection for yourself and your family should you become ill or incapacitated. Yet you maintain total control of your investments. The trust is activated only when you are unable to manage your investments, and only for as long as necessary.

In addition, the trustee can be directed to use the trust's assets to pay household bills and taxes, for example. At a time when your loved ones are burdened by concerns other than financial ones, they will have the confidence of knowing that we are managing your family's finances in your absence.

When you establish a living trust, you designate two types of beneficiaries. The first type are the income beneficiaries (typically, yourself and your spouse), who receive regular payments of the trust's income or principal as outlined in the trust agreement. The second type of beneficiary is the remainder beneficiary. These are the beneficiaries who, upon termination of the trust--which can be at your death or some other specified time--are those individuals who will receive the assets in the trust. But the trust may continue beyond your lifetime and become an integral part of your estate plan. There are good reasons for coordinating a will and a living trust.

A living trust can operate as a highly efficient organizational tool, providing a unified approach to the management of your assets. As a result, you can ensure that your family will have a continuous, uninterrupted flow of income. In addition, you can set up an orderly distribution plan for your assets, either over a certain number of years or keyed to certain circumstances.

Finally, having all your assets "under one roof" will make it easier for your spouse and/or other beneficiaries to keep track of how the assets are being managed and to know where to turn with questions or concerns.

In sum, a revocable living trust offers a wide range of features and benefits that can help you reach the goal of securing your family's financial future. If you would like more information about how a revocable living trust can be shaped to your financial goals and needs, ask us at any time.

ASK GARDEN STATE TRUST COMPANY

Dear GSTC,

I live in a retirement community, and we recently had a local lawyer talk to our club about living trusts. I thought trusts were only for the very wealthy. What more can you tell me about living trusts that I can understand?

Just Retired

Dear Just Retired,

As an independent trust company, we often are asked questions about living trusts. Here are a few of the more common ones we want to share with you:

1. Is it difficult to set up a trust?

No. You start by discussing your financial concerns and investment goals with a trust officer or other wealth management professional along with your attorney, who will prepare the trust agreement.

2. What does the agreement say?

The agreement outlines that you, as grantor (maker) of the trust, are transferring assets to a legal entity (the trust) to be administered by a named trustee. A typical trust agreement arranges for income from the trust assets to be paid to you or someone you designate (the income beneficiary) for your or their lifetime and then upon your death, the remaining trust assets will be paid to one or more persons you name (remainder beneficiaries).

3. Do I give up permanent control of my assets when I set up a living trust?

Absolutely not. The beauty of a living trust is that it is revocable at any time. And most importantly, you can make changes to your trust agreement as family, economic or investment circumstances dictate as long as you have the mental capacity to do so.

4. Who makes the investment decisions regarding the assets in the trust?

Many people look for objective, unbiased portfolio supervision because they lack the time or specialized knowledge to do all the necessary investment homework themselves. As a professional trustee we can serve in that capacity. But you may delegate as much or as little investment responsibility as you wish. For instance, you may spell out your goals and requirements in your trust agreement and leave the specific investment decisions to the trustee. Or you may ask that proposed investment changes be submitted for your approval. Or you may choose just to ask for recommendations and do your own research as well.

5. How much must I transfer to the trust?

Many people mistakenly believe that trusts are only for the very rich. In our experience, most people who set up trusts do not classify themselves as rich, and they do not have tens of millions of dollars of assets. Many of them set up a trust when they sell a business, receive an inheritance, or want to safeguard a retirement nest egg.

6. Why should I pick a corporate trustee rather than name an individual?

Garden State Trust Company, as a corporate trustee, has the depth of experience, investment management capabilities, reliability, and responsiveness to meet your needs. We would be glad to explain more about the benefits of a corporate trustee and that of a living trust to you, your family, or your retirement village club in person.

Thank you for your question.

CLICK HERE TO ASK YOUR OWN QUESTION

GSTC President, Adam Brower (L) and Lebanon NJ Region Trust Administrator, Walter Pennett (R) attended the 25th Elder and Disability Law Retreat and the New Jersey NAELA Chapter 2023 UnProgram in April.

In our Informational Articles, Estate Plan Essentials see the documents that your estate planning attorney will most likely recommend to you for a comprehensive estate plan. Read A Blueprint for Investors: The Investment Policy Statement to learn about how an Investment Policy Statement (IPS) brings structure to the process of investing and can be a useful and valuable document to help you accomplish your investing goals.

Monday, May 29, 2023, is Memorial Day and all of us at Garden State Trust Company would like to remember and honor the men and women who have made the ultimate sacrifice to protect our country. Thank you to all who have served and are serving in our Armed Forces. Lastly, we continue to send special prayers for the people of Ukraine defending their country.

Sincerely,

Ira J. Brower, Founder

Estate Plan Essentials

A surprising number of people have not yet attended to their estate planning. Perhaps this is because estate planning has become so much more complicated in recent years, even though the burden of taxes at death has been in decline. Estate planning now usually covers medical and financial decisions before the end of life, as well as after death.

Here are the documents that will be drafted for many estate plans today.

DOCUMENT	WHAT IT DOES
Financial
Will	Identifies beneficiaries. May establish one or more trusts for ongoing asset management. Nominates the
Power of attorney	Delegates authority to an agent to make financial decisions. The agent's authority ends when the principal is incapacitated.
Durable power of attorney	Delegates financial decision power to an agent, even if the principal is incapacitated. In some cases, the power "springs" into being upon incapacity or other identified event.
Revocable living trust	Transfers assets and full financial management authority to a trustee. The trust may continue into incapacity, even beyond the death of the trustor.
Medical
Power of attorney for health care (sometimes called a health care proxy)	Identifies an individual to make medical decisions when one is unconscious or incapacitated.
Living will	Provides guidelines for medical decisions when an individual becomes terminally ill, such as whether feeding tubes or ventilators should be used to prolong life.
Do not resuscitate order (DNR)	Specifically requests that cardiopulmonary resuscitation not be used if one's heart or breathing stops.

Source: Merrill Anderson Company

Any developments occurring after July 1, 2022, are not reflected in this article.

Beware of Financial Fraud: "Phishing"

The Financial Industry Regulatory Authority (FINRA), formerly the National Association of Security Dealers, continues to warn investors and consumers about "phishing," a scam that uses spam e-mail to lure investors into revealing bank or brokerage account information, passwords or PINs, or other types of confidential information. Often the e-mails falsely claim to be from brokerage firms, banks or other services that investors are likely to use.

According to some estimates, scam artists are able to convince up to 5% of e-mail recipients to respond to them. And, alarmingly, the number and sophistication of phishing scams are continuing to increase dramatically, according to the "anti-phishing work group" (www.antiphishing.org).

Here's What To Look For

Scam e-mails may use the names of real people, or legitimate-looking addresses, authentic-looking logos or graphics, links to pages of a bona fide Web site and official-looking fine print or references to laws. This seeming authenticity lures the investor into providing sensitive information, usually by requesting that he or she send a reply e-mail or click on a link to a Web site that mimics a legitimate site.

To lower an investor's guard, he or she may be told that: an account will be closed unless information is updated; the investor's identity must be verified because the account is being used by a third party in violation of the law; because of a technical update, the account must be reactivated; or recent law changes require users to identify themselves.

How To Protect Yourself

FINRA offers several tips, developed by the Federal Trade Commission, to help prevent you from becoming a victim of phishing or other online identity theft:

If you receive an e-mail that warns you, with little or no notice, that an account of yours will be shut down unless you reconfirm your billing information, do not reply or click on the link in the e-mail. Instead, contact the company cited in the e-mail using a telephone number or Web site address that you know to be genuine.
Avoid e-mailing personal and financial information. Before submitting financial information through a Web site, look for the "lock" icon on the browser's status bar. It signals that your information is secure during transmission.
Review credit card and bank account statements as soon as you receive them in order to determine whether there are any unauthorized charges. If your statement is late by more than a few days, call your credit card company or bank to confirm your billing address and account balances.
Keep your personal and financial information secure online. Make certain that your computer system is up to date with the latest security patches and use antivirus and spyware detection software. Firewall software should thwart intruders from getting access to your PC over a network. Never download software or files from an unknown source.
If you believe that you've been scammed and are the victim of identity theft, visit the FTC's Identity Theft Website (IdentityTheft.gov) to report identity theft and get a recovery plan.

Any developments occurring after July 1, 2022, are not reflected in this article.

A Blueprint for Investors: The Investment Policy Statement

Company retirement plans, charitable organizations and other entities must define clearly, in writing, exactly how the contributions that they make are invested and managed. One of the ways that this goal is accomplished is by drawing up a document, often referred to as an Investment Policy Statement (IPS). For individual investors, too, an IPS can be a useful and valuable document.

The Benefits of an IPS

An IPS brings structure to the process of investing. It also brings discipline by requiring the investor to put into words the strategy for the management of his or her investments--something that the investor may not have articulated formally previously. And, as time passes, it permits the investor to examine how this strategy is working and what changes, if any, may be necessary.

An Outline

There is no one right way to draft an IPS. But, although some of the organizational structure and language used in drafting the document can vary, there are several elements that are likely to appear in any IPS.

An overview. The opening section of the IPS usually provides an overall perspective on the investor and his or her current investment profile. It may include, for example, current assets, how much will be invested over a stated period of time, and one's investment time horizon, tolerance for risk and target asset allocation.

A statement of objectives. Here the investor's goals are outlined, both for the short term and the long. This section may discuss how much of the investor's assets will be dedicated toward meeting each individual goal, over what particular time period.

Investment philosophy. What is important to the individual from an investment perspective? What does he or she believe about investing and the investment process? These are the kinds of questions that need to be answered to put an investor's philosophy into words. This philosophy may be stated in generalities or be presented in depth--addressing such issues as risk, diversification, trading, taxes and other costs.

The selection of investments. This section is the core of the IPS. It is used to develop the investor's asset allocation strategy--how investments will be distributed among the various asset classes. This discussion often focuses on such things as investment diversification, choice of nontraditional investments and ways to make the investor's portfolio tax efficient.

Monitoring and review. An effective IPS also will set up the criteria for measuring the performance of investments. Monitoring will help tell the investor when a rebalancing of a portfolio may be necessary and, perhaps, what investments, if any, should be sold.