mike winkelmann aka. beeple, CC BY 4.0, via Wikimedia Commons
Myths About NFTs
From the AP March 12, 2021, "A digital art piece, tweaked using cryptocurrency technology to make it one-of-a-kind, sold at auction this week for nearly $70 million. That transaction made global headlines and buoyed already-mushrooming interest in these kinds of digital objects - known as non-fungible tokens, or NFTs - that have captured the attention of artists and collectors alike."

When Beeple's artwork sold last month for a record-breaking $69.3 million, one may have thought that NFTs have gone mainstream. Over the past months we have been exposed to NFTs through all sorts of media outlets:

  • Saturday Night live aired a spoof of the NFT market last month.
  • Rolling Stone Magazine published an article with the headline "Music NFTs Have Gone Mainstream. Who's In?"

The question is, are NFTs going mainstream? However, before jumping on the bandwagon, one might want to question whether a market that is difficult to access, harder to understand and not necessarily transferable deserves to be called mainstream? We advise caution before comparing NFTs to the collectables market that has established measures of valuation and verification. NFTs are an emerging market, and one should not consider them mainstream investments yet.

Wait a minute! What is an NFT and what is their claim to fame?

NFT stands for Non-Fungible Token. "Non-Fungible" means that it is unique and not mutually interchangeable and "Token" refers to it being stored on a blockchain (a digital ledger).

The NFT contains information on the digital asset and ownership information. Digital assets can be lots of different things, not just artwork. An NFT can represent an item procured in a video game, a musical album (Kings of Leon are going to be the first band to release an album as an NFT), or even a tweet (Jack Dorsey, who is a co-founder and the CEO of Twitter, sold the first ever tweet and gave the proceeds to charity for an astounding 2.9 million dollars).

Compared to physical collectables, NFTs are supposed to bring additional benefits to the table. Four of the biggest touted benefits are:
FAMOUS WILL FOR THE MONTH JACQUELINE KENNEDY
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In this month's Informational Articles read, A Big Risk In Acting As Trustee. Being the trustee of a trust is not an honorary position, it is a serious one with legal obligations. Accepting such responsibility is what trustees are paid to do. A corporate trustee, such as Garden State Trust Company, has made trusteeship a fully staffed and accountable business enterprise. Also read, The RMD Vacation Is Over. Last year individuals taking a required minimum distribution were given a reprieve from the requirement to take minimum distributions from their IRAs and qualified retirement plans. So far, not this year!

One bit of nostalgia in our Articles of Interest. Who remembers being taken to the Horn & Hardart automat in Philadelphia or New York City by your parents or grandparents? I do! Read Return Of The Automat.

Last month I left you with these words, hopefully within the next few months the majority of us will be fully vaccinated and we can begin to return to some normalcy. For me, it will be trying to make up lost time spent with my 9-year-old twin granddaughters. Well, my wife and I were fully vaccinated and we got to hug Noelle and Charlotte at our home after such a long period of time.

Stay well,
Ira J. Brower, Founder
Q & A: Living Trusts
For centuries, living trusts have been a popular management tool for the preservation and growth of one’s assets. Living trusts offer a remarkable degree of flexibility, helping people achieve their needs for today as well as for tomorrow. And for planning for the future, for coping with the unexpected. For maintaining financial security for loved ones and for organizing one’s assets in an efficient manner. Not to mention the peace of mind that comes with having a solid plan in place for the management of one’s wealth.

We often are asked questions about living trusts. We would like to share a few of the more common ones 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?
Generally, the agreement delineates that you, as grantor (creator) 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 a spouse (the income beneficiary) for his or her lifetime and then, after, to children (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’s revocable at any time. What’s more, you are able to make changes to your trust agreement as family, economic or investment circumstances dictate.

4. Who makes the investment decisions with regard to 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. We would be pleased to act 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 an investment advisor. 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. But the great majority of people who set up trusts don’t classify themselves as rich, and they don’t have multimillion-dollar trusts. 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? 
Briefly put, a corporate trustee has the financial strength, investment management capabilities, reliability and responsiveness to meet your needs.
 
We would be glad to explain more about the benefits of a corporate trustee, as well as the many benefits that a living trust can offer you and your family. Please feel free to contact us at any time.

© 2019 M.A. Co. All rights reserved.
Any developments occurring after March 1, 2019, are not reflected in this article.
A Big Risk In Acting as Trustee
Being the trustee of a trust is not an honorary position, it is a serious one with legal obligations. Accepting such responsibility is what trustees are paid to do. A corporate trustee, such as us, has made trusteeship a fully staffed and accountable business enterprise. Here's an example of amateur trustees who were held to account for their failures. 

In 2004 David Hodges, Sr., established two irrevocable trusts, one exempt from the generation-skipping transfer tax and the other not exempt. His business associates served as private trustees. The beneficiaries of the trusts were his then wife, his three biological children, and his two stepsons. Five years later, David had second thoughts about his earlier generosity. His estate planning attorney explained that though his irrevocable trust could not be amended, it could be "decanted" into a new trust, and the new trust did not have to have identical beneficial interests. 

David liked that idea--he liked it perhaps too much. In a 2010 trust decanting the interests of the stepsons were extinguished. A 2012 decanting removed one of the biological sons. The 2013 decanting removed the interest of the now ex-wife. At no time did the trustees raise any objections to the trust decantings. They did not even consult with independent counsel on the propriety of their actions to protect themselves.

In 2014 the beneficiaries who had been cut out of the trusts brought a lawsuit to have all the decantings declared void, and they won. Interestingly, although the facts suggested that David may have retained effective control of the trusts, the courts declined to void the decantings on that basis, as it would have had major federal tax consequences. Rather, they ruled that the trustees had failed to give proper weight to the interests of all of the beneficiaries or to the original purpose of the trust, and so they had failed in their fiduciary duties. 

New trustees were appointed for the trusts. The former trustees then filed a motion to recover the tens of thousands of dollars in costs they had incurred in defending the decantings in court. The new trustees not only resisted that request, they demanded that the former trustees personally pay the costs incurred by the trust itself in getting the decantings set aside, as well as their own costs! Given the extent of their breach of fiduciary duty, the Supreme Court of New Hampshire ordered the former trustees to pay up.

(April 2021)
© 2021 M.A. Co. All rights reserved.
The RMD Vacation Is Over
Last year seniors were given a reprieve from the requirement to take minimum distributions from their IRAs and qualified retirement plans. The suspension of the rules, included in the CARES Act, was enacted at a time when the stock market had moved sharply lower, and so it was intended to prevent a forced emptying of retirement funds when values were low. Prices have since risen and the market indices have been setting records. There is no sign of Congress renewing a suspension of the rules.

Accordingly, taxpayers who turn 72 this year must begin taking their RMDs (required minimum distributions), and older taxpayers must resume their program of drawing down tax-favored retirement funds. The amount of the RMD is calculated based upon the age of the account owner and the total retirement account values at the close of the prior taxable year.

Normally the RMD must be received during each tax year, with failure to distribute the full amount subject to a 50% tax penalty. However, there is a grace period for the first year of RMDs, as the senior gets used to the new distribution program. For those who turn 72 in 2021, the first RMD is not due until April 1, 2022. That gives them an extra year of tax-deferred growth.

Caveat: The grace period is not a panacea. Someone who delays a first RMD to 2022 will have to take two such distributions for the 2022 tax year, which could lead to higher taxes on the distributions as well as higher taxes on Social Security benefits and perhaps higher Medicare premiums.

Timing Distributions

An RMD may be taken at any time during the tax year. In a rising market, maximum tax deferral may be obtained by delaying the distribution for as along as practical. Someone who will be using the distributed funds for ordinary expenses may want to withdraw 1/12 of the RMD on the first of each month. This "averaging out" approach may be preferred when stock prices are especially volatile. 

If you have several IRAs, the RMD is determined by adding all the accounts together. However, you do not need to take an RMD from each account. You could take the entire distribution from the smallest account for consolidation, or you could choose to liquidate the investments with the poorest prospects to rebalance your portfolio as you take the distribution. 

RMDs can be tricky, so getting professional advice is likely to be money well spent. 

(April 2021)
© 2021 M.A. Co. All rights reserved.
Articles of Interest
Several new concepts are bringing back the pandemic-friendly early 20th-century phenomenon. Read More


From a spouse or child to a bank or lawyer, you have several options to consider when selecting a trustee for your estate. Read More


We tracked every step to find out. Read More
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2021. All rights reserved.