Trusts
IRA Alternatives
Profit Sharing / Money Purchase Plans
Variable Annuities
SIPC

Trusts

What is a trust?
A trust is a legal agreement between two parties, the person who creates the trust and the person, institution or independent trust company responsible for administering the trust, the trustee. The trustee manages the assets placed in the trust for the benefit of a third party, the beneficiary.

Who needs a trust?
Not everyone needs a trust, but most people should consider one. Trusts aren’t just for the affluent. Setting up a trust is an excellent way to control what happens to your estate, regardless of its size, to possibly reduce estate taxes and protect against the expense and aggravation of probate.

More than two million U.S. taxpayers have established trusts. Those who benefit most are married couples with net estates exceeding $4 million and single people with net estates exceeding $2 million; however, under the current tax law, these amounts will increase over the next several years.

The net value of an estate can be determined by adding the market value of all assets, including real estate, personal property, businesses, bank accounts, investments, IRAs or other retirement benefits, and life insurance, then subtracting liabilities.

Unlike wills, trusts are not subject to probate and therefore allow you to keep your affairs private.

Will or trust? Which is best?
Most people need both. A big advantage of a trust is that it is generally the best strategy to avoid probate and protect financial privacy. Wills must be validated by probate court, a lengthy and expensive process that can take six months to two years and, in some cases, even longer. Probating a will may involve attorney’s fees, executor’s commissions, administrative and other court costs. Unlike wills, trusts are not subject to probate and therefore enable you to keep your affairs private and minimize settlement costs and estate taxes.

Why Set Up a Trust?
There are many reasons to set up trusts. Married couples often realign the ownership of their assets to save substantial federal estate taxes and pass more on to their heirs. Rather than owning assets jointly, they choose to own assets individually so that they can each take full advantage of the increasing unified credit amount. Preserving each spouse’s unified credit can save hundreds of thousands of dollars in estate taxes.

If the time comes that you are no longer able to handle your own affairs, trusts can ensure that there will be someone who is experienced and objective to "mind the store." If there is a serious illness or disability, a trust ensures that a plan is in place to take care of your needs and those of your loved ones.

When the trust is managed by a full-service trust company, other professional services can be provided, such as bill paying.

Business owners can use trusts to save on estate taxes when passing along businesses to heirs.

Trusts are also useful for blended families with spouses or children from previous marriages. The trust can spell out exactly how marriage affects the inheritance of children or grandchildren from a first marriage.

Naming an independent trust company removes the emotional element often associated with friends or family members.

Who sets up a trust?
Usually, attorneys draft trusts.

What about fees?
Generally, fees for trust services are spelled out in the trust document. Under normal circumstances, they are calculated annually, based on the level of responsibility assumed by the trustee and the value of the assets in the trust. Fees are charged quarterly or monthly and a portion may be tax-deductible.

Is a Trust Right for You?
Even people of moderate means may be subject to estate taxes, which could be significantly higher than income taxes.

But saving on taxes isn’t the only reason for trusts. Some families want to plan for long-term care or education for their children or grandchildren. Others want to provide for a favorite charity. One thing is certain, if a trust is needed, the time to plan for it is now.

How does one choose a trustee?
Many people prefer to name an independent trust company to handle their affairs. Trustees who don’t deal with trusts on a regular basis can be overwhelmed by the duties required of them. Also, naming an independent trust company removes the emotional element often associated with friends or family members and assures that your wishes are fulfilled exactly as they are spelled out in the trust.

Why Choose Raymond James Trust N.A.?
There are several advantages to naming Raymond James Trust as trustee. Unlike other providers of trust services, our skilled trust advisors deal exclusively with trust issues. The solutions our trust experts provide are never "one size fits all," but are individually tailored to fit personal needs.
(Raymond James Trust N.A. is a wholly owned subsidiary of Raymond James Financial, Inc. (NYSE-RJF) which provides financial services to individuals, corporations and municipalities.)

IRA Alternatives

Who can make a contribution to a Roth IRA?
Single taxpayers with adjusted gross incomes (AGI) of less than $101,000 or married taxpayers filing jointly with AGIs of less than $159,000 may each make a full contribution. For single taxpayers with AGIs between $101,000 and $116,000, and married taxpayers with AGIs between $159,000 and $169,000, the contribution is gradually reduced to zero.

Can I convert my current IRA into a Roth IRA?
Yes. An individual with an AGI of less than $100,000 (no distinction is made for married filing jointly) can roll over a traditional IRA to a Roth IRA.

Note: This AGI limit will be eliminated in 2010.

Can I convert an IRA to which I made nondeductible contributions?
Yes. However, income tax is due on the distribution amount less any nondeductible contributions.

Can I Convert after Starting my Age 70½ Required Distribution?
Yes. The amount of the required minimum distribution from the traditional IRA for that year cannot be included, but the remaining account balance can be converted or rolled over to a Roth IRA.

Can I contribute to both a traditional and a Roth IRA?
Yes, but the combined contribution limit is $5,000 for 2008 or $6,000 for those age 50 and older.

What Are the Deductibility Rules for Traditional IRAs?
For single taxpayers, the threshold for full deductibility is $53,000 for 2008. For spouses filing jointly, the deductibility threshold is $85,000 for 2008.

Is there a penalty for early withdrawal from a traditional IRA?
Yes. However, certain distributions are exempt from the 10% premature distribution penalty. Withdrawals made before attainment of age 59½ are exempt from the penalty if made:

• For the first-time purchase of a home (lifetime limit of $10,000),
• For the payment of qualified higher education expenses,
• To an alternate payee pursuant to a divorce decree or separation agreement,
• For the payment of medical expenses in excess of 7.5% of AGI,
• For payment of health insurance premiums during certain times of unemployment,
• As a series of substantially equal payments and/or
• As a result of disability or death of the IRA participant.

What are the consequences of a withdrawal from a Roth IRA?
If you can pay the taxes due on the distribution from sources outside your IRA, you will likely be better off with a Roth. If you are young and in a lower tax bracket, the implications of tapping your account to pay the tax bill will be offset by years of tax-free earnings and ultimately, tax-free withdrawals. However, if you anticipate being in a much lower tax bracket in the future, it may not be advantageous to pay tax on your existing IRA today. Consult your financial advisor to help you assess the pros and cons of the alternatives.

Should I convert my current IRA into a Roth IRA?
If you can pay the taxes due on the distribution from sources outside your IRA, you will likely be better off with a Roth. If you are young and in a lower tax bracket, the implications of tapping your account to pay the tax bill will be offset by years of tax-free earnings and ultimately, tax-free withdrawals. However, if you anticipate being in a much lower tax bracket in the future, it may not be advantageous to pay tax on your existing IRA today. Consult your financial advisor to help you assess the pros and cons of the alternatives.

Highlights of the Roth IRA

• Contributions are not tax-deductible when made.
• Distributions are free from federal income tax if taken after age 59½ or as a result of death or disability as long as an investment has been made in the account for at least five years.
• Early withdrawals are free from both income tax and penalty if used for a first-time home purchase ($10,000 lifetime limit) and the account has been in place for at least five years.
• There are no age limits. Individuals with earned income can make contributions after age 70½.
• There are no required minimum distributions during the IRA owner’s lifetime.

Highlights of the Traditional IRA

• Individuals not covered by an employer’s retirement plan can make a fully deductible $5,000 ($6,000 for those age 50 and older) contribution (see chart on pages 6 and 7) even if their spouses are covered by an employer’s plan, as long as their AGIs are $159,000 or less. (There is no income limit if neither is covered by an employer’s plan.)
• The income limits for IRA deductibility are gradually increased through 2008 for those married taxpayers participating in their employers’ retirement plans.

Comparison Chart

Profit Sharing / Money Purchase Plans

Can a profit sharing plan be combined with a 401(k) plan?
A 401(k) plan is simply a profit sharing plan with a provision allowing employee salary deferrals. Most 401(k) plans provide employer matching contributions based on the participant’s contribution, with an additional option for a profit sharing allocation. Although most 401(k) plans use a salary ratio formula for profit sharing plan allocations, any of the other formulas could be used.

What are the costs of implementing and maintaining a profit sharing plan?
It can vary significantly depending on the design complexity of the plan, the number of employees, and the structure of the investment portfolio.

Can an IRA be rolled into a profit sharing plan?
If the IRA is specifically created as a "conduit" IRA, it can be rolled into a profit sharing plan. Otherwise, the plan document would have to specifically allow IRA rollovers, tracking these assets separately.

Do all employees have to be included in a plan?
Certain employees may be excluded, but strict coverage rules are enforced to prevent the plan from discriminating in favor of highly compensated employees.

What is the difference between a profit sharing plan and a SEP plan?
The profit sharing plan allows vesting schedules, while SEP plans require 100% immediate vesting. A profit sharing plan can require employees to work at least 1,000 hours to share in the contribution, but a SEP plan covers all eligible employees, regardless of hours worked.

What are the administrative requirements?
All profit sharing plans are subject to IRS reporting requirements. This includes keeping the plan up to date with new laws, performing non-discrimination tests, filing a Form 5500 return each year and providing benefit statements and other plan information to participants at least annually. Self-employed persons with no employees are not required to file returns until the plan has $100,000 in assets. It is recommended that a professional pension plan administrator be retained to perform these annual reporting functions.

Variable Annuities

What is a Variable Annuity?
A variable annuity is a contract between you – the annuity owner – and a life insurance company. In return for your purchase payment, the insurance company agrees to provide either a regular stream of income or a lump-sum payout at some future time, generally when you retire.

How Does it Work?
A variable annuity has an accumulation phase and an income phase. The accumulation phase begins as soon as you invest. Your purchase payment(s) can be invested in the securities portfolios and fixed interest options that are available in your contract. Unlike a mutual fund, where interest, dividends and/or capital gains are taxed each year, any growth in an annuity accumulates on a tax-deferred basis. Of course, your investment can also lose value.

When you are ready to take distributions, typically at retirement, you can choose to have your principal and interest paid out in the form of income payments – called annuitization – or you can take systematic withdrawals or receive a lump sum payout.

What Do I Receive for my Purchase Payments?
For each purchase payment you make, you receive "accumulation units" in the insurance company’s separate account. The separate account purchases shares in professionally managed investment portfolios. The performance of your investment does not depend on the performance of the insurance company’s assets. Only the performance of the investment options you have chosen will affect your results. Each unit’s value or "price" is determined by the value of the investment portfolio, less any insurance charges, divided by the number of units outstanding.

Some annuities now credit investors with payment enhancements on their purchase payments, putting more dollars to work for you up front. Generally, in exchange for the payment enhancement, you’ll accept a higher surrender charge and/ or a longer period of time over which the surrender charge applies. These enhancements are generally based on a certain percentage – such as 2%, 3% or 4% of a premium – and are normally added as earnings to the contract. Details of these features are found in each annuity’s prospectus.

How Will Tax Deferral Affect My Investment?
Tax deferral can allow the value of your annuity to potentially grow faster than that of a comparable taxable investment. This graph shows the advantages of tax-deferred compounding, assuming a $50,000 investment at an 8% rate of return over 30 years, and a 28% marginal tax bracket.

This chart does not reflect the fees and charges associated with any particular investment. Such expenses would lower overall returns. Although annuities typically include a mortality and expense risk charge of 1.25%, an asset based administration fee of .15%, a contingent deferred sales charge which starts at 7% in the first year and decreases 1% each year until is reaches 0%, and an annual contract charge of $30, these charges are not reflected in the hypothetical performance. If they had been reflected, the ending values of the tax-deferred investment would be lower. Gains in the taxable investment may be taxed at a lower capital gains tax rate. Lower maximum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, thereby reducing the differences in performance between the accounts shown. You should consult with your tax advisor regarding your particular tax responsibilities and circumstances. This chart is for illustrative purposes only and is not intended to imply or represent a guarantee of any specific return on any particular investment. Please see your financial advisor for performance information of specific investments. Investment results fluctuate and can decrease as well as increase. Withdrawals of taxable amounts are subject to income tax and, if taken prior to age 59 1/2, a 10% federal tax penalty may apply. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may also reduce benefits available under the contract as well as the amount available upon a full surrender.

What is the Difference in Taxation for Taxable and Tax-Deferred Investments?
When you invest in a currently taxable investment, like a mutual fund, any dividends or interest you earn during the year are taxable, even if you reinvest the dividends. Mutual funds can earn money for an investor in several ways, which can be taxed at different rates. Capital gains may be taxed at a capital gains tax rate that is lower than the income tax rate; dividends and interest are generally taxed at income tax rates.

Many investors may not realize that if you sell an investment that has had any gains, or if the mutual fund money manager sells a security that results in a distribution to you, you may owe capital gains taxes.

Variable annuities are insurance alternatives whose gains accumulate tax-deferred and are taxed as ordinary income when withdrawn. When you invest in a variable annuity, any growth is credited to your account but is not taxed until you take distributions, at or near retirement.

In a variable annuity, when you make a withdrawal, you’ll owe income taxes at your then current tax rate on any portion of the withdrawal that is considered earnings. For tax purposes, interest is always considered to be withdrawn first, so unless you begin to exhaust principal, you may owe taxes on the full amount of your withdrawal. In addition, because the IRS set up tax-deferral rules in order to encourage Americans to save for retirement, if you make a withdrawal before age 59 1/2, you’re likely to owe a 10% federal tax penalty on the amount withdrawn.

With an annuity, if the contract owner dies the beneficiary will owe income taxes only on the taxable portion of the death benefit. Special rules apply to spousal beneficiaries, allowing for continuation of the tax-deferred status of the contract in addition to other settlement options.

The beneficiary of a currently taxable investment does not pay income taxes on the earnings received. If you purchase your annuity in a traditional qualified plan such as an IRA or Keogh account, different tax rules apply. Generally, the full amount of any withdrawal, even an amount attributed to principal, is taxable because in a qualified plan the contributions to the annuity are made on a pre-tax basis. Please consult with your tax advisor for additional information.

There are many distinctions between mutual funds and variable annuities. For instance, mutual funds serve various short- and long-term financial needs, while variable annuities are designed specifically for long-term retirement savings. Unlike mutual funds, variable annuities include insurance features for which you pay certain fees and charges, including mortality and expense charges and a contract administration fee. Mutual funds and variable annuities each have unique features, benefits and charges, and you should discuss the appropriateness of any investment for your particular situation with your financial advisor.

Why is it Called a "Variable" Annuity?
"Variable" refers to the fact that the contract value and/or income generated by the underlying investment options is not fixed. Your return will vary due to market conditions and prevailing interest rates.

What Types of Securities do the Portfolios Contain?
The majority of variable annuities let you choose among portfolios of stocks, bonds and money market alternatives. You can allocate your money among different portfolios, depending upon how aggressive or conservative you wish to be.

Who Decides Exactly What I Invest In?
You choose the investment options in which you will invest from among those offered in your contract. The insurance company issuing the annuity develops relationships with one or more professional money managers, who decide which specific stocks and bonds will be a part of each investment option. Most variable annuities offer you several different money management firms and multiple investment options within one alternative.

Why Should I Invest in Securities Through a Variable Annuity?

• Diversification. A variable annuity offers you the opportunity to diversify your portfolio across a broad range of investment options, asset classes and money management styles, all within a single investment alternative.
• Switching privileges. Most variable annuities permit you to reallocate your money among the investment options. Transfers among investment options within the annuity are not taxable, but they may be subject to a transfer charge.
• Insurance guarantees:
  
  • Guaranteed death benefit. The insurance company generally guarantees that in the event of death before the income phase (annuitization) begins, your beneficiary will receive the greater of (a) the entire amount of your premiums less an adjustment for withdrawals, charges and fees, or (b) the current contract value. Some companies offer more generous benefits that allow for a guaranteed increase in the premium amount, a step-up in the guaranteed death benefit value at certain contract years or the opportunity to potentially increase your death benefit value by a percentage of earnings at the time of the owner’s death. There may be an additional fee for these benefits. Read the prospectus for the variable annuity you choose to find out exactly what type of death benefit the alternative offers, as well as its associated costs.
  • Fixed-interest options. Most annuities also let you allocate funds to one or more fixed-interest options in which the insurance company guarantees your interest rate.
  • Income for life. If you chose to "annuitize," you can be guaranteed an income that lasts as long as you live.
  • Minimum guaranteed income. Some variable annuities guarantee a minimum level of income during retirement – no matter what happens in the financial markets. This minimum level is usually based on the amount of your contributions less an adjustment for withdrawals. Income protection features such as these can give you the confidence to invest in the higher growth potential of equities, knowing that when you annuitize your contract (see page 8) your retirement income will never go below the minimum level. If your investments have performed well, you receive the higher income based on your actual contract value.
  • Return of principal amount. Some annuities provide a special program in which the insurance company guarantees return of an amount representative of your premium regardless of the actual performance of the underlying investments. The principal may be returned in a lump sum at some future time or through systematic withdrawals lasting a specified period. Please note that these features do not guarantee the performance of any variable options in the contract and may require that you hold your contract a minimum number of years before you may take advantage of the guarantee. Withdrawals also reduce benefits and values. There may be an additional fee for these benefits.

Can I Have Access to My Money Before I’m 59½?
Yes. Most variable annuities provide for withdrawal of a specified amount during the accumulation phase, free of company-imposed charges.

Withdrawals in excess of the amount specified are possible, but may trigger surrender charges. Again, all withdrawals of taxable amounts are subject to income tax, and if you are younger than age 59 ½, the IRS may also impose a 10% federal tax penalty.

You may also encounter a "market value adjustment," or MVA, if you take money out of fixed-interest options before the end of the interest-rate guarantee period.

The MVA reflects any difference in the interest rate environment between the time you place your money in the fixed account option and the time when you withdraw the money. This adjustment can increase or decrease your contract value.

Finally, be aware that some annuities allow you to make systematic withdrawals from your contract, which can provide you a regularly scheduled income during the accumulation phase. Systematic withdrawals are generally subject to the same tax rules as other withdrawals and must cease upon annuitization.

What Does "Annuitize" Mean?
A contract is "annuitized" when it converts from an accumulation phase to an income phase, and the owner or other payee(s) receive(s) periodic annuity payments. Most companies offer several annuity payment options, based primarily on how long you want the income to last.

Am I Taxed Differently on Annuity Payouts than on Withdrawals?
Yes. Once you have annuitized, each payment is structured as a partial return of principal and part interest. If you have only contributed after-tax money to the annuity, only the interest portion of the payment is taxable. You should consult your financial advisor and/or tax advisor before deciding to annuitize. See above for a discussion of taxation rules on withdrawals made before you annuitize.

What Should I Consider When Selecting a Variable Annuity?

• Historical performance of the portfolios. While not a guarantee of future results, historical performance should tell how well the annuity’s investment managers have done in both positive and adverse markets.
• Fees and charges. Carefully review details on the fees and charges of the contract, and available benefits. These are provided in the annuity’s prospectus.
• Soundness of the insurance company. All guarantees, such as death benefits, income protection, among others, are backed by the insurance company’s claims-paying ability. Most companies are rated by independent industry analyst A.M. Best Company and may also be rated by Standard & Poors and Moody’s Investors Service. Your financial advisor can give you information on the ratings of companies whose annuities he or she is recommending.

How Can I Find Out Whether an Annuity is Right for Me?
Ask your financial advisor to review your circumstances and determine if an annuity is appropriate for you. Consider the annuity’s unique advantages:

• Tax deferral
• Professional management
• Diversification
• Retirement income you cannot outlive
• No cap on how much you can invest
• Death benefits

You’ll see why variable annuities can be a valuable alternative in today’s economic and tax environment.

Investors should consider the investment objectives, risks, and charges and expenses of variable annuities carefully before investing. The prospectus contains this and other important information. Prospectuses for both the variable annuity contract and the underlying funds are available from your Raymond James financial advisor and should be read carefully before investing.

Variable annuities are long-term investment alternatives designed for retirement purposes. Withdrawals of taxable amounts are subject to income tax, and if taken prior to age 59 ½, a 10% federal tax penalty may apply. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may also reduce benefits available under the contract as well as the amount available upon a full surrender. An investment in the securities underlying variable annuities involves investment risk, including possible loss of principal. Your contract, when redeemed, may be worth more or less than the total amount invested. Past performance is no guarantee of future results.

The purchase of a variable annuity is not required for, and is not a term of, the provision of any banking service or activity. Variable annuities are not federally insured by the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board or any other government agency and are not a deposit of, guaranteed by, endorsed by, or an obligation of any federal banking institution.

For advice concerning the tax treatment of variable annuities and for complete, up-to-date details on tax law, consult a qualified tax advisor. For additional information and the variable annuity prospectus(es) of your choice, please contact us today.

Not FDIC or NCUA/NCUSIF insured • No bank or credit union guarantee • May lose value

Information on this page is provided courtesy of AIG SunAmerica, one of the nation’s largest annuity providers.

SIPC

Am I protected by SIPC if my securities begin to fall in value?
No. SIPC provides coverage against certain losses if the SIPC member fails financially and is unable to meet obligations to its securities customers. It does not protect against market fluctuations.

Does excess SIPC increase cash coverage above $100,000?
Yes. Each account you have is protected for the net equity of your securities and cash positions.

Are shares of a money market fund considered to be cash or securities?
Securities. However, these shares are held by an outside custodian and thus not subject to loss by Raymond James, if Raymond James becomes insolvent.