Welcome to=20 the latest edition of Trust Matters, = our=20 periodic update on noteworthy trust = planning issues=20 designed specifically for professional = advisors. =20 The content of this newsletter is provided = through our=20 association with National Advisors Trust = Company. =20 CIS is a Trust Representative Office of National = Advisors Trust.

Both=20 articles in this edition of Trust Matters = explore the=20 opportunities afforded by =93open = architecture=94 trust=20 arrangements. More and more families are = taking=20 advantage of this type of structure. The first = article,=20 The=20 Trust Team discusses a trust structure = where=20 multiple parties have individually tailored = roles and=20 responsibilities and how this structure can = empower=20 family members. The second article,=20 Discretionary=20 Distributions a Positive Development in Trust=20 Evolution explores in=20 more depth the benefits of the open architecture = trust=20 structure and how advisors and co-trustees can = play a=20 valuable role in the process .=20

We = have=20 found that many clients prefer the professional = guidance=20 and confidentiality of their financial advisor = and are=20 reluctant to involve a large, impersonal = financial=20 institution for trust and custodial = services=20 .=20

The=20 independent investment advisors who created = National=20 Advisors Trust (including CIS) formed an = independent=20 trust company that honors and supports the=20 client-advisor relationship. The model relies on = a=20 strong foundation of an estate planning = professional,=20 the registered investment advisor, and the trust = company. The three parties focus on what they do = best.=20 The result is a solid trustee and investment = management=20 solution for clients, one that protects their = wealth and=20 the future of their estates. =

One of our=20 core beliefs is that clients are better served = when=20 their professional advisors work as a = team. We=20 encourage you to speak with us about working = with CIS=20 and National Advisors Trust Company to address = your=20 clients' investment and trust=20 needs.

The Trust = Team=20

Traditionally, = choosing a=20 trustee has been a simple and straightforward = task. Most=20 of the time, families have either appointed a = family=20 member or a trusted advisor to act as trustee,=20 monitoring trust funds, handing paperwork and = tax forms,=20 and making distributions to beneficiaries. But a = relatively new practice=97often referred to as = =93slicing=20 and dicing=94=97is emerging as a trust trend. = Consider this=20 observation in a recent Wall Street = Journal=20 article:

As trusts become more = complex and=20 investing strategies become more sophisticated, = more=20 families are using teams of multiple trustees = and=20 advisers, each with very specific roles and=20 responsibilities. Changes in state trust laws in = recent=20 years have also accelerated the = trend.

In=20 its most basic form, a trust is separate legal = entity=20 created for a person or persons to hold assets = for=20 someone or for the benefit of others. Trusts are = popular=20 because their flexibility allows them to adapt = well to=20 changing needs and wants. This type of trust = where=20 multiple parties are assigned individually = tailored=20 fiduciary roles=97known as an open = architecture=20 trust=97has its benefits, particularly when = developed=20 by National Advisors Trust.=20

Benefits=20 of Open Architecture Trusts =

For=20 wealthy families, a private trust company=92s = structure=20 can be awkward and burdensome; an open = architecture=20 style trust is more seamless and smooth. Rather = than=20 reduce the role willing family members play in = the trust=20 decision-making process, it actually increases = it,=20 empowering them with positions tailored to their = preferences along with the ability to choose = individuals=20 they have confidence in to manage those = responsibilities=20 outside of their areas of expertise and = interest. The=20 result is willing, informed participation = instead of=20 dependency. It=92s an appealing alternative to = the=20 traditional =93one size fits all=94 traditional = trust=20 structure.

Tom=20 Linhoff, Senior Vice President, Trust = Administration,=20 National Advisors Trust, agrees with this way of = thinking.

=93What=20 we are seeing more and more, depending on the = needs of=20 the trust, is certain individuals being named to = perform=20 certain responsibilities,=94 says Linhoff. = =93The benefit is=20 you are employing people who have specific areas = of=20 expertise or whom the family has confidence in. = For=20 example, a trust may have assets in it that are = standard=20 financial assets which could be handled by a = financial=20 advisor, but it could have other non-standard = assets=20 (e.g. real estate) that should be managed by = another=20 party.=94

The=20 Trust Protector

In=20 order to manage the growing group of trustees = that=20 accompanies an open architecture trust, many of = these=20 trusts enlist a =93trust protector.=94 The role = of this=20 person is hire to hire and fire trustees. =

Considerations=20

There are=20 challenges to using open architectural trusts = that need=20 to be considered before they are established and = employed. It = is=20 imperative to outline specific roles and=20 responsibilities each trustee will have. There = is also=20 the potential for higher costs since each = advisor is=20 paid separately, and legal questions about who = is=20 ultimately responsible need to be resolved = before an=20 open architecture trust is put into place. = Fortunately,=20 National Advisors Trust=92s customized approach = and=20 expertise with working with third parties makes = open=20 architecture trusts a viable and beneficial=20 option.

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Discretionary=20 Distributions a Positive Development in Trust=20 Evolution

=20

The=20 typical personal trust used for transferring = wealth is=20 still designed to protect against two risks: a = loss of=20 value due to estate and gift taxes, and the = shortcomings=20 of heirs who lack the desire, experience, = aptitude or=20 legal capacity to manage assets properly. =

This limited defensive = posture=20 with respect to a trust=92s administration = leaves the=20 impression that personal trusts lack any = positive=20 function and serve only one goal: simply prevent = harm.=20 Such a limited objective naturally leads to a = limited=20 decision-making process, and such a limited = process=20 naturally neglects the possibility of change = over=20 time.

Fortunately, we are = beginning to=20 see trusts in a more positive light. The law = currently=20 grants settlors wider choices and more = flexibility in=20 writing the trust document. Multiple trustees = and=20 advisers can be assigned very specific roles and = responsibilities, including the inclusion of = advisors=20 and co-trustees in making discretionary = distributions to=20 beneficiaries. National Advisors=20 Trust supports the inclusion of advisors in = the=20 decision making process, and accepts = discretionary=20 authority acting in conjunction with advice from = a=20 grantor=92s estate planning attorney, investment = advisor,=20 accountant and other trust = advisors.

Safe=20 and Sensible

With expected higher = unified=20 credits we=92re seeing an increasing number of = clients who=20 are focused on non-tax considerations in their = estate=20 documents which provide, upon their deaths, for = a trust=20 that can be enjoyed and used by their children = but=20 supervised in the distributions, sometimes not = requiring=20 full distribution at any age.

These=20 clients want the assets their children will = inherit from=20 them protected from creditors and potentially = divorcing=20 spouses. They also want to require their = children to=20 present distribution requests to a trustee or=20 co-trustees, who will use both common sense and = analysis=20 in advising them and determining if funds will = be=20 distributed for various purposes. =20

Rather=20 than having a mandatory distribution age whereby = some=20 percentage of the trust is automatically = distributed to=20 them, children or other primary beneficiaries = instead=20 simply submit requests when they have needs they = believe=20 will be supported by the trust, i.e. for a = residence,=20 business start-up, education, etc. The intent is = to give=20 them incentive to work and carry on with a = productive=20 life while simultaneously providing help for=20 =93reasonable=94 requests that, if the parents = were still=20 alive, would be happily given.=20

Collaboration=20 Required

Modern,=20 =93open-architecture=94 trust designs like these = encourage a=20 collaborative relationship among beneficiaries = and=20 trustees, one that takes on more aspects of a=20 partnership. Multiple advisors (commonly an = independent=20 investment advisor, attorney, and accountant, = working=20 with a trust company) often assume duties once = assigned=20 to a single trustee. =20

Discretionary=20 distributions can considered through a specific = approval=20 process inclusive of a client=92s professional = advisors,=20 and others that have the confidence and trust of = a trust=20 grantor, rather than resisted or dismissed as = being=20 against the grantor=92s wishes.=20

Thanks=20 to the Uniform Trust Code, it is possible for = the trust=20 grantor to specify that several fiduciaries each = have=20 sole responsibility for a different activity, = whether it=20 be investments, distributions, or accounting and = custody.=20

Flexible=20 for the Future=20

Too=20 often, the trust is simply tolerated as a = necessary evil=20 for saving taxes or preventing mismanagement. = Instead,=20 it should be respected as a more flexible means = for=20 improving collective family decision-making and=20 individual responsibility. As open-architecture = trusts=20 become more common, we will begin to see more = trusts=20 that acknowledge the past but focus on the = future=20 . =

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In This Issue

Dear=20 Clients and Friends,

The Trust = Team=20

Discretionary=20 Distributions a Positive Development in Trust=20 Evolution