Banks, trust companies collaborate on individual disaster planning

Most people borrow, save, spend, invest and plan through their banks.

While some people have financial relationships with several different providers (many of which compete in the banking arena), banks play a primary role in finances.

Because consumers often look to their bankers as their trusted financial advisers, bankers often play a vital role in helping their customers prepare for potential family or business disasters.

This role puts them in the position of leadership on a team of professionals to ultimately satisfy the needs of their customers. When the needs of a client exceed the banker’s area of expertise, appropriate referrals to qualified professionals can elevate the stature of the banker with the customer while solidifying the banking relationship.

There’s no doubt that disasters can – and do – happen.

The potential of a family or business disaster in the United States has been all too apparent in recent years. Tragic events can bring home both the unpredictability of life and the realization that many people are woefully unprepared for a sudden disaster and the effects it can have on their family. The destruction experienced at the World Trade Center raised a number of issues in the estate and financial planning community. Although it is impossible to anticipate everything that could happen, thoughtful planners now agree on the importance of creating individual disaster plans.

Estate plan

An estate plan is a key ingredient of an individual disaster plan. Because most personal and business financial transactions flow through banking networks, it is critical to have an estate plan that minimizes the disruption of financial affairs. The use of trusts was born out of this need. Traditionally, trust departments were a part of the local bank. Now there are more choices, including independent trust companies that allow greater opportunities to tailor fit financial and estate plans to meet the needs of the client.

Revocable trusts have become the centerpiece of many estate plans customized to meet the unique needs of individuals, families and businesses. A revocable trust, commonly known as a living trust, is a legal document that is similar to a will in that it contains instructions for what happens to assets after the owner dies. A revocable trust is different in that it avoids probate at death, allows control of all assets and prevents the court from controlling assets should the owner become incapacitated.

Assets can stay in the trust, managed by the person or corporate trustee selected by the owner, until the beneficiaries reach the ages chosen for them to inherit, or, in Missouri, even into perpetuity. A trust can provide for a loved one with special needs or protect the assets from beneficiaries’ creditors, ex-spouses and future death taxes.

As trustee of your own trust, you can do anything you could do before, including buying or selling assets, and changing or even canceling your trust (that’s why it’s called a revocable trust).

If you become incapacitated with a revocable trust, the successor trustee you have chosen looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you can resume control. When you die, your successor trustee pays your debts and distributes your assets. All this is done privately, according to instructions in your trust, without court interference.

Age, marital status and wealth are not the only factors in determining the need for a living trust. If you own titled assets and want your loved ones (spouse, children or parents) to avoid court interference at your death or incapacity, consider a living trust. Titling determines the disposition of most assets at death, and proper titling is an important part of the estate planning process.

Most bankers focus on the needs of each customer and are happy to provide their clients with management choices, including independent trust companies that they know can offer the customer more tailored trust services.

Important areas of estate planning services include business succession, spousal support, guardian appointment, asset transfer, incapacity, liquidity, tax, health care, communication and asset protection. Additional documents may be used to shore up other areas of need and to make your plan comprehensive.

These are just some of the important things to consider in preparing an individual disaster plan. Individual circumstances and desires will dictate what a plan should include. Whatever you decide, remember that responsible and prudent planning dictates periodic reviews and updates of your total plan to ensure that your goals and objectives to be carried out as you wish.

Tim Parrish is vice president of trust and investment planning with Trust Company of the Ozarks. He can be reached at tparrish@trustcompanyozarks.com.[[In-content Ad]]