TRUST BANKING

Trust Banking

Trust Banking

Trust Banking#: 1

The first problem is concerned with the Mr. Stephen Johnson who is the grantor of a revocable trust account with the bank. The amount that has been used to developed this trust is $2,200,000. This amount has been created for the Grandson and Granddaughter. Both the grandchildren have future expenses that need to be achieved in the coming years. However, there is one issue that is a major concern for Mr. Johnson and their Grandson and Granddaughter. The amount cannot be used for the next two years. The reason is that both the Grandson and Granddaughter can use this amount after getting 18 years old. Though, Mr. Johnson had gone through various alternatives, in order to make the best decision under the current circumstances. Mr. Johnson took advice from his Trust Officer who suggested him various alternatives and all of them had their own importance.

The second aspect is the Financial Amount. The distribution of the amount has different views and it needs to be carried out in the best possible way. M. Johnson is very much eager to see his Grandchildren fulfilling their financial needs with this amount. This is the reason why the trust amount has been exclusively reserved for the future needs of the Grandchildren. Mr. Johnson does have some concerns especially regarding the disbursement of the amount related to the Granddaughter. The Granddaughter is suffering from some mental problems and she is also struggling in her education. Mr. Johnson is worried that the high availability of the money can make her misuse the amount in unnecessary activities. Mr. Johnson needs to consider several options before finalizing the option of the financial alternative.

The Current Investment Portfolio Structure was mentioned in order to make the final decision based on different calculations. The Investment Portfolio structures had different values and they were based on some numerical formulas. All the portfolios provide different solutions but only one option can be selected from various choices. The first portfolio provided an option of earning net income equaling 1.25% from the 60% amount invested in the bank's growth stock mutual fund. The second portfolio provided an option of earning net income equaling 6% of the net income from the 30% amount invested in the bank's fixed income mutual fund. The third and the last portfolio provided an option of earning net income equaling 2% of the net income from the 10% amount invested in cash equivalent money market fund.

Under the given situation, it would be appropriate for Mr. Johnson to invest 30% in the bank's fixed income mutual fund. The reason is that the 30% of the amount would be invested in the Fixed Income while the remaining income can be used for the current expenses. Secondly, the percentage earned on the Net Income around 6% is also going to be very useful for Mr. Johnson. The percentage earned on this Net Income would prove to be beneficial in meeting the financial needs of the Grandson and ...