Implementing MPT In an Allocated Total Return Trust

Jordan, Michael L. M.
June 1998
Journal of Financial Planning;Jun98, Vol. 11 Issue 3, p78
Academic Journal
This article explores an alternative form of language titled an Allocated Total Return Trust that permits a trustee greater latitude in implementing a modern investment policy for a trust. Two fundamental bodies of law govern the way the traditional estate planning trust is drafted and implemented. Each state has adopted statutes that dictate the investment standards for a trustee and the method for accounting for income and principal within the trust. The Internal Revenue Code prescribes the requirements for trusts that are intended to qualify for the marital deduction. The first long-entrenched legal principal, which governs the operation of trusts, is the investment responsibility of the trustee. In a typical revocable trust, the surviving spouse receives the income from both the qualified terminable interest property marital trust and the family trust. The proposed language of the Allocated Total Return Trust provides an opportunity for a trustee to invest the trust assets in a new way to better the return for all the beneficiaries. As a financial advisor, one will have the flexibility that this type of trust can provide to enable one to recommend appropriate investments for the trust. This trust language permits the surviving spouse to share in the better total return historically available with an investment in equities and, at the same time, permit the children to ultimately share in the growth of the trust corpus. Financial advisors need to be recommending this new type of trust to their clients and their attorney for consideration.


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