Trust Brochure

TRUST AND INVESTMENT DIVISION

TRUST. EXPERTISE. ACCESSIBILITY.

Ou r H ISTORY

Since 1948, The Paducah Bank and Tust Company has held strongly to one main purpose—to provide financial services with a personalized commitment to each and every one of our clients. Because we are locally and independently owned, we have the unique flexibility to tailor our products and services to our clients’ financial concerns and meet their evolving needs.

This focus on our clients has allowed us to grow and prosper through changing markets and conditions. It is a simple philosophy, yet none but Paducah Bank has held it so true!

The mission of the Tust and Investment Division

of The Paducah Bank and Trust Company is to provide families in the communities we serve with unparalleled trust, employee benefits, and investment products and services in a convenient, courteous, and professional manner. By cultivating one-to-one relationships with our customers, we strive to assist them in the creation and preservation of wealth. We pursue our mission while maintaining safety and soundness, as well as complying with state and federal laws and regulations.

Our commitment to your family ...

We strive to build multigenerational relationships with the families we advise. By building a personal relationship with you, we can address your family's current needs and anticipate those of future generations.

... and to our community

We are committed to maintaining a local presence in the communities we serve. Our experts live and work in their own communities. As a Paducah Bank client, you will have an experienced team of professionals, each contributing their expertise in trust, estate planning/administration, investments, and employee benefits administration to meet your needs and goals.

Estate Planning and SETTLEMENT

The ultimate goal of estate planning is to ensure the security of your family and others named in your Will. In order to do this, you will need to meet with your attorney to prepare your legal estate planning documents, i.e. Will, Power of Attorney, Living Will Directive, and/or Trust. To achieve your goal, you name an executor, who will be responsible for settling your estate with the same care and skill that you took in making your plans.

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Estate Planning and SETTLEMENT

The importance of choosing the right executor cannot be overemphasized. Trust is essential in this relationship. You want to be completely confident that, in your absence, your wishes will be carried out exactly as you defined.

Skill and experience are critical in selecting an executor. Your executor will have to deal with taxes, tax returns, debts, settle claims, manage real estate, investments, and business interests, just to name a few. A view of an executor’s duties:

• Collect and safeguard estate assets.

• Inventory all assets and obtain valuations needed for tax purposes, using qualified appraisers as needed.

• Pay valid debts and collect money owed to the estate.

• File federal and state income, estate, and inheritance tax returns as required.

• Pay all taxes due.

• Maintain detailed records of all estate transactions.

• Re-register securities and make the appropriate securities transfers.

• Distribute all estate assets to the proper benef iciar ies or to the trustee i f a trust is created.

• Prepare a comprehensive final accounting for the beneficiaries and the court.

When you choose Paducah Bank to be the executor of your Will, you can take comfort in knowing your wishes will be handled with compassion and expertise. As your executor, we bear the responsibility of carrying out the instructions contained in your Will and for taking all other steps necessary to settle your estate.

Naming an inexperienced executor might be burdensome for that individual and could negatively affect the handling of your estate. The role of executor carries a huge responsibility, a responsibility some individuals and family members are not willing to take.

Paducah Bank is well-qualified to serve as your executor. We are always available, financially responsible, experienced, and impartial. We can hire necessary experts, use group judgment, and understand the personal considerations often needed in settling an estate. When you name Paducah Bank as your executor, you name experience.

Etate Etimator

ASSETS

Cash, bank accounts $

Money market funds

Other mutual funds

Money owed to you

Home

Other real estate

Art, antiques

Other personal property

Stocks

Bonds

Business interests

IRAs/401(k)s

Employee benefit funds

Individual life insurance

Group life insurance

Other

Total assets $

LIABILITIES

Home mortgage $

Other mortgages

Home equity loans

Auto loans

Other

Total liabilities $

NET ESTATE $ (Assets minus liabilities)

Revocable Living TRUST

Tust can be an indispensable tool for crafting a ound estate plan.

Depending on your specific needs and objectives, our trust advisors, along with your legal and tax advisors, can help you create a Revocable Living Trust.

A Living Trust is set up primarily for the benefit of the person who establishes the trust, the grantor, during his or her lifetime. Some benefits of a Revocable Living Trust are:

• All your financial assets are centralized under one ownership—your trust.

• Relieves you of the burden of managing your financial assets.

• Ensures the ongoing management of your financial assets if changes in your health or personal life occur, such as illness, incapacity, or travel.

• Private and confidential—your assets pass to heirs without going through probate. Assets held in trust will not be a matter of public record.

• Flexibility to amend or terminate the trust anytime during your lifetime.

• Specifies precise instructions regarding the ultimate disposition of assets.

The terms of the Living Trust are detailed in a trust agreement, prepared by your legal advisor, which defines how you wish for your finances to be managed during your lifetime and following your death. A Living Trust gives you full access to your assets. Income earned by the trust is distributed to you, and only after your death will the trust property transfer to the beneficiaries either outright or in trust.

The trust can be changed or revoked at any time during your lifetime. When you pass away, the trust becomes irrevocable and the ter ms of the trust are not subject to further change. Upon your death, the trust either terminates or continues for the benefit of designated beneficiaries.

Trusts are a valuable tool in the estate planning process. As your corporate trustee, Paducah Bank will be responsible for managing your trust investments, distributing the trust income, investing new funds the trust receives, and paying any financial obligations allowed through the terms of the trust.

A Testamentary Tust, also known as

a Trust Under Will, is created by an individual’s Will. The trust goes into effect upon an individual’s death, thus making the trust irrevocable (cannot be changed).

A Testamentary Trust receives the decedent’s assets upon settlement of their estate. This trust is commonly used when someone wishes to leave assets to a beneficiary but does not want the beneficiary to receive the assets outright. The trust allows you to designate a trustee to hold and manage your assets as well as carry out your wishes after your death.

This trust is designed to accomplish any vision you have for the future of your beneficiary, such as:

• Providing income for your family.

• Safeguarding assets for a beneficiary who is unable to manage money.

• Directing funds for a child’s education.

• Leaving a lasting legacy to your favorite charity.

Irrevocable Life Insurance TRUST

Wen it comes to estate planning, maximizing the amount of your assets that will pass to the next generation is a high priority. One tool for maximizing your family’s wealth and minimizing your estate taxes is the Irrevocable Life Insurance Trust. An Irrevocable Life Insurance Trust can be a valuable part of a well-prepared estate plan because of its ability to:

• Keep life insurance out of your taxable estate.

• Provide funds to pay your estate taxes.

• Protect your insurance proceeds.

• Protect your beneficiaries.

An Irrevocable Life Insurance Trust is designed to own life insurance on you, the creator of the trust. The trust is also named as the beneficiary of the insurance policy and will collect the proceeds after your death. Since you do not own the insurance, it is not part of your taxable estate and, therefore, is not subject to estate taxation. Life insurance, when structured properly, can provide for the liquidity needed to bear the tax liability of an estate, while also helping to reduce the size of the estate in the interim.

Special Needs TRUST

Caring for those with pecial needs is an expensive and lifelong proposition. Parents wonder whether they have the financial resources for a special needs child, especially for the period after the parents’ death. If you have a family member with special needs, consider a Special Needs Trust.

A Special Needs Trust ensures individuals who are physically disabled or mentally challenged can have the use of property held for their benefit. Many families face the challenge of trying to preserve and protect assets for the care of an incapacitated family member. A Special Needs Trust lets you save and invest money for someone who requires long-term or lifetime care.

A Special Needs Trust is specifically designed to help the beneficiary avoid losing essential government benefits they are currently receiving or they may receive in the future, such as Medicaid, SSI, and mental health benefits. This is a unique feature as most traditional trusts are considered available assets, or a countable resource, for SSI and Medicaid qualification purposes, and therefore may reduce or eliminate the amount of government assistance the individual may receive. For this reason, it is critical that the Special Needs Trust be drafted carefully by an experienced trust and estate attorney.

A Special Needs Trust can be an invaluable tool to help families provide the best possible care and quality of life for a loved one. With proper planning and drafting, a Special Needs Trust can improve the level of medical treatment, rehabilitation, education, dietary needs, equipment, and travel available for the beneficiary.

Conservatorship and ASSET CUSTODY

Family misfortune, uch as the death of both parents, can leave

minors on their own. A Conservator, such as Paducah Bank, can be appointed by the court of jurisdiction.

Since legal title to the funds cannot be in the name of a minor, the court-appointed Conservator will manage the funds until the minor reaches the age of majority (18 in most U.S. states). As Conservator, Paducah Bank will ensure the following:

• All appropriate bills of the minor will be paid (usually subject to court approval).

• Funds will be invested.

• Tax returns filed and taxes paid.

Upon the minor reaching the age of majority, the minor’s funds will be fully accounted for and Paducah Bank will work closely with the client in the distribution of the funds.

You know how you want to invest your money, and you have the

time and expertise to research and design your portfolio. But when it comes to the recordkeeping, you would prefer to let someone else handle that aspect, someone like Paducah Bank. As a financial institution, we would be the perfect solution for your recordkeeping needs.

With a Paducah Bank Custody Account, you maintain total control of your investment decisions while our professional team provides you with the following:

• Processing and settling trades.

• Tracking your security’s cost basis information.

• Significant reduction in trading expenses.

All of this will give you the peace of mind you need to accomplish your investment goals.

A Charitable Remainder Tust (CRT ) is established when you

contribute highly-appreciated assets to the CRT and name a charity or charities as the ultimate beneficiary. During your lifetime, or for a stated period of time, the trust pays income for your benefit. Upon your death, ownership of the principal is transferred to the charity without estate or gift tax.

With a CRT, no estate or gift tax is paid on the ownership transfer, reducing the tax burden on your estate and enabling a larger charitable contribution in your name. In addition, you can receive a current income tax deduction on the actuarial value of the CRT at the date the assets are transferred to the trustee. The deduction may be carried forward up to five years if you are not in a position to fully utilize the deduction in the year of creation.

Paducah Bank works with you and your attorney to establish a Charitable Remainder Trust and navigate the various structures, including a Charitable Remainder Unitrust (CRUT) and a Charitable Remainder Annuity Trust (CRAT). Once it is established, we can administer the trust and ensure distributions are made and assets are distributed as you intend.

In deciding whether or not a Charitable Remainder Trust is right for you, keep these CRT facts in mind:

• The trust is irrevocable. Once it is established, you cannot change your mind.

• The trust provides you or your beneficiary with income.

• Highly-appreciated assets are sheltered from capital gains tax.

• The ultimate tax burden on your estate is reduced.

Consider a CRT as part of your charitable giving. While you wll enjoy the income of the trust during your life, you will leave a lasting legacy to benefit others.

Investment AGENCY

At Paducah Bank, we understand that your life is busy enough without worrying about inflation, learning complicated and constantly changing tax regulations, or pouring over daily stock quotes. Our investment management services provide the expertise, experience, and support you need for convenient results-oriented investing.

Your investment objectives are unique to your personal situation and lifelong dreams. For this reason, it is vital that your investment plan is based on sound strategies that take into account your tax bracket, your family situation, your timeline, your position for risk, and the lifestyle you have imagined at retirement.

Listed below are four solid reasons you should make Paducah Bank your resource for investment management services:

1. EXPERIENCE YOU CAN DEPEND ON.

Paducah Bank has the experience and expertise to help you create and manage your wealth through investing. We manage assets for individuals, trusts, foundations and endowments, and retirement plans. Paducah Bank has developed a reputation for excellence in trust administration and recordkeeping services. We are committed to our goal of preserving and enhancing the capital you entrust to us.

2. DISCIPLINED APPROACHES DESIGNED TO MEET YOUR OBJECTIVES.

Recognizing that our clients have varied investment goals, we have expertise in numerous distinct investment disciplines from short-term bonds to aggressive growth equities. We are committed to research—both internal and external—which allows us to provide value, quality, and credibility in our investment choices.

3. INVESTMENT ALTERNATIVES PROVIDE FLEXIBILITY.

Paducah Bank offers a wide variety of investment choices, including individual stock and bond investments, mutual funds, and managed asset allocation services. Our expertise in multiple investment styles, combined with our wide range of investments, make us uniquely qualified to custom tailor a portfolio to meet your needs.

4. PERSONALIZED SERVICE AND EFFECTIVE COMMUNICATION.

Your investment needs are not exactly like any other investor’s. Our flexible approach to investing allows us to craft an investment strategy to meet your specific needs. An investment professional works with you to evaluate your investment objectives, risk tolerance, tax situation, and other related issues. We then develop an investment strategy to meet your objectives. Your comfort level is our top priority; there should be no surprises. The better we know you, the more successful we will be in helping you achieve your goals.

GLOSSARY of Estate Planning Terms

ADMINISTRATOR

Person appointed by a court to manage the estate of a person who dies without a Will.

BENEFICIARY

A person designated to receive t he income, principal, or proceeds of a trust, estate, insurance policy, or retirement plan.

CHARITABLE TRUST

A trust having a charitable organization as a beneficiary.

CORPORATE FIDUCIARY

An institution which acts for the benefit of an individual. One example is a bank acting as trustee.

ESTATE TAX

The tax paid by the administrator or executor of a person’s estate out of the estate’s assets.

EXECUTOR (or Personal Representative)

Someone appointed by a person in a Will to carry out the Will’s provisions. A “co-executor” acts as executor with another.

FIDUCIARY

A person in a position of trust or confidence. The fiduciary is bound by a duty to act in good faith. Examples: trustees, executors, and administrators.

FUTURE INTEREST

A property interest which cannot be currently possessed, used, or enjoyed.

GIFT TAX

Tax on gifts generally paid by the person making the gift rather than the recipient.

GIFT-TAX ANNUAL EXCLUSION

The annual federal gift tax exclusion allows a person to give away a certain amount (as adjusted for inflation) to as many people as you wish without those gifts counting against your lifetime exemption.

GRANTOR

The one who creates the trust and grants the property.

GROSS ESTATE

The total value of an individual’s property for estate-tax purposes.

GUARDIAN

A person legally appointed to manage the rights and/or proper ty of a person incapable of taking care of his or her own affairs. A “guardian ad litem” is appointed by the court to prosecute or defend an action for a minor. Also known as a “conservator.”

HEIR

A person entitled to inherit a portion of the estate of a deceased person.

INTEREST

Any right to property.

INTESTATE

Dying without a Will.

JOINT OWNERSHIP

The ownership of property by two or more persons, usually with the right of survivorship.

LIFE INSURANCE TRUST

A trust that has the proceeds of a person’s life insurance policy as its principal asset.

LIVING TRUST

A trust that goes into effect while the trust creator is still living.

POWER OF APPOINTMENT

The authority given by one person to another under a trust agreement or Will to decide who will receive and enjoy an interest in property.

POWER OF ATTORNEY

A document which authorizes a person to act as another person’s agent.

PROBATE

The proving of the validity of a Will.

PROBATE COURT

A court with the power to probate Wills and settle estates.

PROBATE ESTATE

Those estate assets which fall within the jurisdiction of the probate court before being transferred to another person. Life insurance proceeds, for example, are not generally part of the probate estate.

SUCCESSOR TRUSTEE OR EXECUTOR

An individual or institution which takes the place of a trustee or executor who can no longer hold office.

TESTATOR

A person who makes or has made a Will.

TESTAMENTARY TRUST

A trust established in a Will which begins after the testator’s death.

TRUST

A legal relationship where property is transferred to and managed by another person or institution for the benefit of another person.

TRUST AGREEMENT

The document which creates a trust and establishes the rules which control the trust’s management.

TRUSTEE

The person or institution entrusted with the duty of managing property placed in the trust. A “co-trustee” serves as trustee with another. A “contingent trustee” becomes trustee upon the occurrence of a specified future event.

WILL

A legally executed document which explains how and to whom a person would like his or her property distributed after death.