Conserving an Estate

THE astute investor is confronted with a twofold problem in conservation. On the one hand he is concerned with the problem of ensuring the safety of principal and the continuity of income during his own lifetime. His next consideration which more often than not is the impelling motive for saving and investing in the first place — is to arrange his affairs so that his estate will be conserved for the benefit of his dependents.

It is a commonplace that the first step in any plan looking to the protection of one’s dependents lies in making a will. Where an investor dies intestate, it becomes the duty of a court-appointed administrator to settle the estate in accordance with the cold provisions of law. An administrator has practically no discretion or latitude. He has no authority to perpetuate, manage, or conserve property interests. After paying all debts and making all collections he must divide what is lelt as the law specifies, irrespective of his own judgment in the matter and irrespective of any wishes the decedent may have had. It is only where a will has been drawn that the express wishes of the decedent can be made to prevail.

The second step in one’s conservation plan lies in the naming of a competent executor or trustee in the will itself. There are serious objections to the naming of individuals to act in this capacity. An individual nominated as executor may not outlive the testator, and the individual nominated as trustee may not outlive the term of the trust, especially if the beneficiaries are minor children. As for the naming of relatives, every probate judge knows only too well how fortunes accumulated by years of toil often shrink with amazing rapidity in the hands of incompetent nextof-kin.

IN addition to these considerations is the fact that few individuals have the necessary training to administer an estate efficiently. Owing to modern inheritance-tax complications and rapidly changing economic conditions, the task of the executor has become more and more technical, requiring a thorough knowledge of law, finance, real estate, accounting, insurance, taxation, and, in many cases, the science of business management. It is not often that one would find an individual sufficiently well versed in all these fields to be able to qualify as an expert administrator.

Fortunately, the modern trust company, which combines the knowledge of many experts, can supply all the qualifications in estate administration which the individual lacks. Unlike the individual executor or trustee, it is permanent organized to survive both the testator and his beneficiaries. In its dealings with beneficiaries it is impartial, its sole object being to carry out the testator’s wishes promptly and efficiently. Being a specialist in the handling of estates, it can make economies in administration that are not within the reach of the individual executor. Finally, it stands in a position of unquestioned financial responsibility - it bears the recognized hallmark of good faith.

The appointment of a competent trust company as sole executor and trustee under a will should be all the guarantee needed to ensure that one’s conservation plan will be faithfully and efficiently carried out. Where there is the possibility, however, that an intimate friend or relative might bring to the estate a particular knowledge that would be valuable, this individual may be associated with the trust company if named in the will as co-executor or co-trustee.

A TRUST company can often make valuable suggestions for improving one’s conservation plan. It is not generally recognized, for example, that federal and state inheritance taxes may seriously reduce the size of an estate, or that the burden of such taxes may be minimized if proper care is taken during one’s lifetime in the selection of investments and in planning a will. Every investor should obtain an expert analysis of his situation in this respect. He can do no better than consult with the trust officers of the institution he names as executor.

Another effective use that may be made of a trust company for conservation purposes is to establish what is known as a living trust. Under a trust agreement of this sort, entered into and made operative during the lifetime of the maker, it is possible to derive an assured income from one’s investments while still living, or to provide for the distribution of property at death without subjecting the estate to the expense and delay of probate proceedings or to inheritance taxes.

Living trust agreements are drawn in various forms to fit peculiar requirements. They may be made to serve ideally for conservation purposes by those who wish to retire from active participation in investment affairs or who desire to see in advance how their estates will be managed.

Finally, there should be a place in ev ery conservation plan for what is known as a life-insurance trust. The procedure in establishing this kind of trust consists in naming a trust company as beneficiary in one’s life-insurance policies and then executing an agreement with the trust company whereby it is directed to collect and invest the proceeds of the policies and to disburse the income and principal of the trust fund according to some specified plan. There is no better means of safeguarding the proceeds of one’s life-insurance policies and of ensuring to dependents a continuing income. The trust company merely conserves and administers the estate which the life-insurance company was the means of creating.

THERE are many investors, no doubt, who feel that their estates are too small to warrant the making of a will or the employment of the conservation services of a trust company. The truth of the matter is that the small estate needs to be conserved in every possible way. The smaller it is the more important it becomes to safeguard it in advance against the loss of a single penny.

Whether one has much or little to conserve, it is far better to pay moderate trust-company fees for competent administration, knowing that one’s estate will be conserved for the benefit of depend ents, than to run the risk of having the accumulation of a lifetime seriously impaired or of having it fail to accomplish the purpose for which it was intended.

The fact should be more widely appreciated by investors that what is worth accumulating is worth conserving, that accumulation without conservation is shortsighted and objectless.