Estate and Trust Administration For Dummies by Margaret A. Munro & Kathryn A. Murphy Esq

Author:Margaret A. Munro & Kathryn A. Murphy Esq.
Language: eng
Format: epub
ISBN: 9781119543978
Publisher: Wiley
Published: 2019-01-07T00:00:00+00:00

Cash needs

As much as you want to maximize the income being earned by the trust’s principal, you need to keep some cash on hand at all times to meet not only the trust’s expected needs, like scheduled income distributions and quarterly estimated tax payments, but also unexpected expenses, such as unanticipated medical expenses for a beneficiary or larger-than-expected taxes for the trust. For example, you never want to sell an investment right before the April 15 tax deadline in order to pay a tax bill because everyone else who owes taxes is facing the same tax deadline. Sales tend to flood the stock market around April 15 of every year, causing prices to plunge. Instead of selling when everyone else is, keep enough of a cushion of cash on hand in the trust to pay those bills when they roll around. And after you’ve paid your bills, make sure to replenish your cash stash — you never want to be caught short.

Cash on hand doesn’t need to sit in an account earning nothing. Plenty of lower-risk money market accounts pay you something on your deposits, even though it’s usually not enough to write home about. The money in the account remains very liquid, and you can pull it out at any time without a penalty when you need it. Every bank offers money market accounts, as do all mutual fund companies and stock brokerage firms. You’ll have no difficulty opening one of these accounts wherever you keep your assets, although you may want to shop slightly farther afield. Some of the highest interest rates paid are offered by Internet banks, which have no local branches and very few employees, keeping their costs low.

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