Vanguard National Trust Company?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

Vanguard National Trust Company?

Postby gasman » Sun Oct 07, 2007 11:41 am

I am thinking of making them institutional trustee for my and my wife's estate. Anyone have any experiences to share?
User avatar
gasman
 
Posts: 559
Joined: Mon Jul 30, 2007 7:13 pm

Named in Mine

Postby JDCPAEsq » Sun Oct 07, 2007 5:01 pm

No actual experience yet, because I am still alive and managing my own affairs, but I have named Vanguard as successor trustee of my revocable trust upon my death or inability to act.

By way of full disclosure, if it adds to my credibility, I spent my entire 35-year career in the personal trust area with five major corporate fiduciaries, and I chose Vanguard over all of my previous employers, four of which I served as a senior officer.

John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

JD

Postby AnthonyF » Sun Oct 07, 2007 5:16 pm

That speaks volumes. Can you elaborate on the reasons you chose Vanguard over the others?

Regards, Tony
AnthonyF
 
Posts: 48
Joined: Sun Mar 11, 2007 8:29 pm
Location: Syracuse, NY

Postby asset_chaos » Sun Oct 07, 2007 7:49 pm

I don't have the industry experience to speak with authority like JDCPAEsq, but I have also named VNTC as trustee to my family trust, with responsibilities varying depending on who's alive and how old others are. My reasons are similar to the reasons I've appointed Vanguard for the last 20-odd years to manage most of our family's money in their mutual funds. (1) Costs matter, even in the more personalized area of trust management. (2) The corporate structure makes it much more likely that Vanguard will keep my family's needs foremost through thick and thin. (3) The corporate structure also makes it unlikely that (1) and (2) will change appreciably during the life of the trust. However, with that said, don't forget to put in a clause giving someone the right to change corporate trustee if need be.
Regards, | | Guy
asset_chaos
 
Posts: 869
Joined: Tue Feb 27, 2007 7:13 pm
Location: Melbourne

Confidence in Vanguard

Postby JDCPAEsq » Sun Oct 07, 2007 8:17 pm

AnthonyF wrote:That speaks volumes. Can you elaborate on the reasons you chose Vanguard over the others?

Regards, Tony


Tony - My decision was based on many of the thoughts expressed above by Guy. I have also had most of my portfolio with Vanguard for over twenty years, and it seemed a natural to designate their trust company to eventually manage these assets. I admire their business philosophy, and feel confident this carries over into their trust operation. Costs are a big factor, and I often thought during my trust career that the smaller accounts were charged excessive fees and didn't receive the attention they deserved. Although I am a Vanguard Flagship client, my account would still be considered "small" by the major corporate fiduciaries who give their primary focus these days to accounts of $10 million or more. Mine would be lost in the shuffle with my former employers, notwithstanding potential annual fees well into five figures.
John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

Trust Re-Alignment

Postby mahmea810 » Wed May 18, 2011 7:04 pm

My wife and her sibs are remainder men to a Trust who's beneficiary is their older cousin. The Trustee of the Trust would like to resign. Her cousin would like to Terminate and Distribute the Trust principal equally between beneficiary and remainder men. After much thought, it may be best to keep the trust intact or convert to a Unitrust. (That is the first question. Does keeping the Trust or undertaking to a Unitrust conversion make sense?)

If the existing trust is continued or the Unitrust is begun in its place, a Trustee would need to be nominated.

Does the Trustee need to be from the State in which the Trust was written? How about the CPA/Bookkeeper for the Trust.

If an institution such as Vanguard 'owns' the Trust, would they invariably use in-house counsel and CPA?

What might the Trust management Cost, on an annual basis, for the Trust Mgt Services.
mahmea810
 
Posts: 3
Joined: Wed May 18, 2011 1:58 pm

Postby Grandpaboys » Wed May 18, 2011 7:25 pm

Will Vanguard help make a Trust? Or is this best done in your State using an Elder Lawyer?
Good Day | GP
User avatar
Grandpaboys
 
Posts: 851
Joined: Sun Mar 04, 2007 10:16 am
Location: Texas

Postby asset_chaos » Wed May 18, 2011 10:11 pm

Grandpaboys wrote:Will Vanguard help make a Trust? Or is this best done in your State using an Elder Lawyer?

You'll need your own lawyer to draw up the trust documents. VNTC will review the trust terms and decide whether they're able to accept the work. There's more info at https://personal.vanguard.com/us/whatweoffer/advice/trustservices, particularly the downloadable documents at the right.
Regards, | | Guy
asset_chaos
 
Posts: 869
Joined: Tue Feb 27, 2007 7:13 pm
Location: Melbourne

Postby Eric » Wed May 18, 2011 11:28 pm

Like JDCPAEsq, I am a trusts and estates lawyer who has named Vanguard as a successor trustee (actually, co-trustee) in my own estate plan. That said, I do not have quite as much confidence in Vanguard's expertise in this area. I suppose I still haven't gotten over this incident, which I found very troubling. (Nor I am the only one troubled by that -- Natalie Choate, quoted in the article, is one of the premier estate planning attorneys in the United States.) In fairness, that was a few years ago and does not directly pertain to Vanguard's handling of a trust, but the whole fiasco did not give me great confidence in Vanguard's knowledge of estate planning issues.

(I don't want to hijack this thread with a discussion of the linked article, but if you're interested in that topic, you can find more discussion in this old Bogleheads thread.)
User avatar
Eric
 
Posts: 608
Joined: Fri Feb 23, 2007 6:44 pm
Location: Texas

Vanguard Trust Services

Postby shawcroft » Thu May 19, 2011 1:01 pm

My wife and I have been "exploring" this question as well and the comments offered on this discussion are- as usual- very helpful. We've gotten information from or spoken with about 8 companies ( Vanguard, USAA, Fidelity, Wells Fargo, Chase Manhattan, HSBC, Bank of America, and Peoples United ( a local bank)
We haven't settled on a specific firm yet but I am not getting any younger so it is time to make a decision.
For anyone who is starting out on this adventure, the banks will give you a LOT of information about wills, executors, and overall estate issues. Just reading those materials and the NOLO estate books will help you become familiar with some of the language (grantor, settlor, income beneficiary, remaindermen and the like). That will be very useful to anyone.
The banks hope you will bring a lot (if not all) of your other financial stuff to them in addition to the trust assets. To a Boglehead, some of the fees charged can be quite surprising.
Like John, I lean towards Vanguard Trust services but I have to recognize my wife (as my successor trustee) needs to be comfortable with them as a potential co-trustee. She likes USAA which is establishing regional financial offices. However, I do not think USAA would leave the trust assets in Vanguard mutual funds.
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby bond50 » Thu May 19, 2011 3:45 pm

For those who have established or will establish a trust with a corporate trustee, what is your reason for doing so? Are you just trying to avoid estate taxes? Are you trying to provide for minor children, in case you and your spouse both pass? Would you not trust any relative to oversee your children's trust in those circumstances?
bond50
 
Posts: 191
Joined: Tue Apr 05, 2011 8:35 pm

Postby JDCPAEsq » Thu May 19, 2011 4:41 pm

bond50 wrote:For those who have established or will establish a trust with a corporate trustee, what is your reason for doing so? Are you just trying to avoid estate taxes? Are you trying to provide for minor children, in case you and your spouse both pass? Would you not trust any relative to oversee your children's trust in those circumstances?


Does your relative have perpetual existence, group judgment, impartiality, understand laws, taxes, investments and accounting, are they financially responsible in the event of loss and always available to the beneficiaries?
John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

Postby asset_chaos » Thu May 19, 2011 8:02 pm

I put the corporate trustee (in my case I chose Vanguard) as the financial manager and successor trustee. My sister is the initial trustee. My logic is that the trustee family member is best placed to know the needs of the beneficiaries and my wishes. My sister is not a good investor, so Vanguard will do that and is also there to provide advise on trust tax and other issues. If the family member can't carry on as trustee or wishes to resign, then there's professional backup to assume all responsibilities.

One doesn't save on estate taxes by having any particular kind of trustee; a trust itself can help to minimize estate taxes. (There is, however, one exception: if a non-citizen spouse is a trust beneficiary and is also the trustee, then the trust can run into tax problems.)
Regards, | | Guy
asset_chaos
 
Posts: 869
Joined: Tue Feb 27, 2007 7:13 pm
Location: Melbourne

Postby Beagler » Thu May 19, 2011 8:24 pm

If my experience with a VG CFP is any indication of their expertise is managing a moderately complex portfolio, I'll take a pass on the VG Trust offering.

Image
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
Beagler
 
Posts: 3442
Joined: Sun Dec 21, 2008 8:39 pm

Postby afan » Fri May 20, 2011 2:00 pm

Not sure handling complex portfolios is their claim. Not sure many people need complex portfolios. If someone does have a good reason for the complexity, then that comes with the cost of finding a trustee to manage it. That would be deviating from Bogleheads principles.

The Vanguard CFP's do very basic stuff for people with very basic questions. Beyond that, I have not encountered one who could deal with anything more.

To the extent that you need someone to follow the laws, follow simple conservative investment principles, and not steal, Vanguard should do that well.
afan
 
Posts: 907
Joined: Sun Jul 25, 2010 5:01 pm

Postby tfb » Sat May 21, 2011 10:35 am

Is it required that you use the asset management service (0.70% for first $1m) if you use the corporate trustee service? Can you have a RIA (say Rick's firm) manage the assets?
Harry Sit, taking a break from the forums.
User avatar
tfb
 
Posts: 6687
Joined: Mon Feb 19, 2007 6:46 pm

Asset Management question

Postby shawcroft » Sat May 21, 2011 2:20 pm

tfb:
Excellent question about having an esteemed RIA (such as Rick Ferri) manage your Vanguard account and pay VG for the many other trust services required- just not the asset management. Not sure if Vanguard does that- as yet. Would seem to be a feature which would appeal to a lot of folks.
Since I am led to believe VG folks monitor this Forum (but cannot post), perhaps these thoughts will "trickle up" to Mr. Mc Nabb (Broad hint to Vanguard individuals monitoring the Forum)
If not, at least using the asset management service of VG makes it reasonably likely that they would not catastrophically screw up your account. To quote Warren Buffet: "It is better to be approximately correct than precisely wrong".
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby JDCPAEsq » Sat May 21, 2011 2:44 pm

Why would you want to split the administrative function of a trustee from the investment function? It almost certainly would increase the cost with little or no added value.
John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

Postby afan » Sat May 21, 2011 9:13 pm

I assume one would do this to get Vanguard's low cost and trustworthy services, and someone else for "sophisticated" investment management. Not clear there is any value to the client in sophisticated investing, but if you want that I don't know whether Vanguard would even be interested.
afan
 
Posts: 907
Joined: Sun Jul 25, 2010 5:01 pm

Vanguard Trust Services

Postby shawcroft » Sun May 22, 2011 9:14 pm

As my earlier post notes, We've been reviewing trust services available from a number of organizations. To me, it is clear that Vanguard offers the most attractive (and cost-effective) trust service.
Because VG offers its trust services at such a competitive rate (0.70% for the first million), I suspect it wouldn't make any economic sense for VG to permit separation of the investment activities from the administrative services. I guess some of us were looking to "tweak" these things a little.
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

A Trust review update

Postby shawcroft » Tue May 24, 2011 10:10 am

Colleagues:
In my earlier post, I mentioned we were exploring the "corporate" successor trustee question.
At the moment, Vanguard still appears to offer the best advantages. We did come across a few things from our exploration of other companies which surprised us and I mention them in case anyone finds them of interest.
Bank of America has TWO trust departments: its "legacy" US Trust operation and its recently acquired Merrill Lynch brokerage. US Trust says they want a minimum of 5 million of trust assets and that will eat an annual AUM cost of about 1.25% - they will manage less but it would probably be even more costly. At US Trust offices , you get the trappings of "wealth"- fine china, fancy wood furniture, and paintings on the wall depicting great historic events, and financial advisors in bespoke suits. By contrast, the atmosphere at Merrill Lynch is more spartan, aggressive, and costly. ML is delighted to "manage" any amount and there are several "account styles" the accounts start at around 2% AUM annually and some creep towards 3%. (I'm not kidding)
As for USAA, I like them and use them for my insurance and some banking. However, their trust service seems to use USAA mutual funds exclusively which are OK but do not compare well to similar offerings by Vanguard. Also, to their credit, USAA clearly warns you (in the printed information about the service) that, once they become the trustee, they will sell everything in the trust which they do not like and put it into the AA they have set for the account using USAA mutual funds- no consideration about things that might cause you heartburn, such as taxes, or buying dividends. USAA also seems to be suffering from a mild to moderate condition of "tactical asset allocation". My wife (a neophyte Boglehead and my successor trustee) was a bit disappointed by these findings about USAA, as she found the idea of being able to meet at a USAA regional office appealing.
My take on USAA: solid, reliable and trustworthy and an honorable company offering financial services to military folks who have often been preyed upon by dishonorable scoundrels. They offer lower cost but not the lowest cost mutual funds and trust services. I continue to view them with high regard
I think Vanguard is likely to be our choice. However, there are a few more folks to talk to just make make sure we have explored most of the reasonable choices.
I hope this update has been helpful to other Bogleheads who may be looking at trusts and/or organizations that may serve as a successor trustee.
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby bond50 » Tue May 24, 2011 5:24 pm

JDCPAEsq wrote:
bond50 wrote:For those who have established or will establish a trust with a corporate trustee, what is your reason for doing so? Are you just trying to avoid estate taxes? Are you trying to provide for minor children, in case you and your spouse both pass? Would you not trust any relative to oversee your children's trust in those circumstances?


Does your relative have perpetual existence, group judgment, impartiality, understand laws, taxes, investments and accounting, are they financially responsible in the event of loss and always available to the beneficiaries?
John


I suppose that I really had two questions.
1) Why use an institutional instead of an individual trustee? This you answered quite well.
2) If your beneficiaries are legally adults, then what is your rationale for establishing the trust instead of leaving the money directly?
bond50
 
Posts: 191
Joined: Tue Apr 05, 2011 8:35 pm

Postby JDCPAEsq » Tue May 24, 2011 5:36 pm

bond50 wrote:If your beneficiaries are legally adults, then what is your rationale for establishing the trust instead of leaving the money directly?


Many reasons - most commonly because the beneficiary doesn't have the ability to manage money or may squander it, and also to insure that all or most of the principal will go to someone else after a certain number of years or upon the death of the income beneficiary. Finally, there are tax reasons for such a trust.
John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

Reasons for using a Trust

Postby shawcroft » Tue May 24, 2011 11:28 pm

John (JDCPAEsq) has pointed out the main reason we are considering a trust. I am more of the "Boglehead" of the family so my wife (the neophyte Boglehead) needs a bit of structure to help her along should I predecease her (odds are I will but no guarantee). Anyway, the trust would be set up so the "assets" support her (she is the "income beneficiary") while she is alive. When she departs, we would like the rest of the stuff to go to our children (they are the "remaindermen").
It is always possible, perhaps unlikely, that a common disaster will befall my wife and I (hopefully not but who knows?). So, she would never use the income from the trust and it would all then go to our children who are currently in their twenties. Since they are still young (but I am endeavouring to have them become neophyte Bogleheads too), we want to have some sort of structure to help them along. Hence, the idea of a trust- the questions now being which and whether a "corporate" trustee should be identified.
My earlier posts have outlined a few of the interesting findings from our discussions with area banks and brokerages which offer trust services. I've learned a great deal from these efforts and it is worthwhile to explore these things if only to get a working knowledge of the common terms used and of what is involved in being a trustee- and also ( in a related matter) what is involved in being an executor of a will (a different topic and one worthy of its own discussion thread).
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Fidelity trsutee?

Postby GoshenGuy57 » Wed May 25, 2011 10:34 am

what happened to the others you were looking at-how about Fidelity?
Goshen
GoshenGuy57
 
Posts: 21
Joined: Mon Feb 22, 2010 10:43 am

Postby statman » Wed May 25, 2011 8:25 pm

There are many reasons to leave assets to even mature and responsible offspring in trust, including protection from creditors (and divorcing spouses). That isn't our topic here. When our revocable trust docs were first drawn a decade ago, our trust-and-estate lawyer suggested Northern Trust as corporate co-trustee. Assuming that you trust your kids (we do) be sure that any corporate trustee serves at the pleasure of the individual trustee.

After several meetings with Northern (we have high 7-figure invested assets) I remained uncomfortable with their willingness to follow research-based (aka Boglehead) investment principles. Our lawyer moreover volunteered that he was not happy with Northern's investment performance. Our trust docs now allow but do not require a corporate co-trustee. I have advised my wife (who will need management after I am gone) and our kids to look closely at VNTC. I have not yet had conversations with VNTC to solidify this recommendation.
statman
 
Posts: 46
Joined: Mon Jul 20, 2009 7:07 pm

Postby JDCPAEsq » Wed May 25, 2011 8:41 pm

statman wrote:Our lawyer moreover volunteered that he was not happy with Northern's investment performance. Our trust docs now allow but do not require a corporate co-trustee. I have advised my wife (who will need management after I am gone) and our kids to look closely at VNTC. I have not yet had conversations with VNTC to solidify this recommendation.


As I mentioned above, I have named Vanguard in my documents. What I didn't mention is that I was a senior officer with Northern in my former life. Ask how many accounts your investment officer handles, and if he looks at the account more than once a year before it comes before the Trust Investment Committee. The way money is made in the trust business is to overload your officers with accounts. I hear you talking...
John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

Fidelity and the others

Postby shawcroft » Thu May 26, 2011 10:33 pm

In my initial post, I mentioned looking at about 8 organizations offering trust services.
The two Bank of America services ( US Trust and Merrill Lynch) dropped out because of reluctance to even consider any index fund investments. In fact, Merrill Lynch was fairly "snotty" in their reply when I offered the suggestion. US Trust was a bit more diplomatic but "it would always be up to the judgment of the Investment Policy Committee".
USAA dropped out of the running for the reasons I mentioned in my earlier post (above).
HSBC was as diplomatic as US Trust but they REALLY wanted to avail us of the wonders they had developed in the new world of alternative investments and structured products. They weren't very specific about the costs of these things but "you do have to expect these to be a bit more because of the unique expertise of the highly skilled managers".
I never got a chance to speak with an investment office at Peoples United (a regional bank)- I wound up with the "new business development" group who really wanted me to bring everything we had (savings, checking, brokerage) to the bank. Sort of hinted we'd get the best deal (and presumably service) if we loaded everything with them.
Vanguard still seems to be the logical choice. I do want to satisfy my curiosity with the others (Wells Fargo, Chase, and Fidelity). I'll let yo know how that goes.
Hope this outline of my endeavors has been helpful to some of you . I greatly value the thoughts and experiences provided by others who have posted on this thread.
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby Eric » Fri May 27, 2011 2:41 am

A few other thoughts.

One, when comparing costs consider the all-in/total fee. Some trust companies quote a single fee for all trustee functions, including investment expenses, while other trust companies break out these charges. In Vanguard's case, there appear to be three charges: (i) the expense ratio of the underlying mutual funds, (ii) a percentage-based asset-management fee for selecting the mutual funds, rebalancing, etc., and (iii) a flat $2500 annual fee for other trustee functions. Even adding all three components, Vanguard's trust company compares very favorably on cost, especially once you get past the first million. But it's still good to quantify that so you can weigh it appropriately when making your decision.

Two, I would be cautious in assuming that Vanguard is skilled as a trustee. I have great regard for Vanguard as an investment company, but I have no reason to think their skills in the investment arena carry over to other areas. Myriad sensitive issues come up in dealing with trust beneficiaries, and those issues often have little to do with Vanguard's core competence. Further, even if Vanguard is skilled as a trustee, it will be limited by the absence of staff on the ground near the beneficiaries. It will be hard for Vanguard staff in Pennsylvania to deal with issues on the ground with a beneficiary in Texas. Vanguard can manage trust investments and talk to the beneficiaries by phone about their needs, but I doubt Vanguard's staff will make personal visits to check on a beneficiary and evaluate his needs directly (except possibly in extreme cases, which may prompt Vanguard to resign).

Three, expertise and local staff vary in importance depending on your family situation. I would expect Vanguard to handle many of the basics (investment management, filing tax returns, maintaining trust records, etc.) just fine, and that may be all your situation requires and all you want to pay for. Alternatively, you may be able to fill in possible gaps in Vanguard's capabilities another way. For example, my wife and I have named her brother and Vanguard as successor co-trustees in our estate plan. We're looking there for Vanguard to handle the investments and recordkeeping while my brother-in-law would deal with any more personal/beneficiary-specific issues that come up (e.g., in determining the beneficiary's needs). So I think that arrangement will work for us, but in other circumstances I might choose to have a more traditional corporate trustee with a local presence, even knowing that the costs will be higher and that the investments won't be managed the way I would prefer (but won't be managed in a crazy way, either).
User avatar
Eric
 
Posts: 608
Joined: Fri Feb 23, 2007 6:44 pm
Location: Texas

Postby afan » Fri May 27, 2011 6:12 am

This is interesting. It implies that most of the trust companies earn a large share of their profits from the fees they charge for investment management, rather than fees for the trust services. One could imagine an alternative business model where they charged for the non investment services, then offered a choice of 1. active management by the trust company, 2. passive management by the trust company or 3. management by some other manager of your choice. For option 3 the trust company would need to be comfortable that they would not be sued if the beneficiaries were unhappy with the performance of the outside manager.

I suppose the problem for the trust companies is that it is difficult to convince people they need to pay 1% or more of assets for holding the investments, preparing tax statements, making distributions, etc, but they might believe that this plus "sophisticated investment management" is worth that much.

It is surprising that simple trust services, plus administering a portfolio of index funds, is as expensive as Vanguard's prices imply. Does it really cost 10 times as much to manage a $100M portfolio as a $10M one?

I love the attitude from B of A and Merrill Lynch. Two organizations that avoided bankruptcy only through massive bailouts lecturing us about their investment expertise!!

Shawcroft,

I have not done nearly as must research on this as you have. In my limited experience it was difficult to get a straightforward statement of costs. Did you get actual prices for trust services from these other institutions? If so, could you post them?

Thanks
afan
 
Posts: 907
Joined: Sun Jul 25, 2010 5:01 pm

Postby jj » Fri May 27, 2011 9:08 am

Very interesting thread - we are thinking about who to appoint as corporate trustee too. Your lawyer will push you toward whoever they are used to using. Great to have the Bogleheads' viewpoints and experiences - please keep your experiences coming.

I wonder if there are any surviving spouses/children beneficiaries who can weigh in with experiences of costs/service levels of various trustees.

I am mindful of a Henry Hebeler (analyzenow.com) article from a few years ago (Can you trust a trust or its trustee?) where he talks about how people he knows feel their deceased husbands' trusts' costs take a big bite out of the income.

But how to keep these costs down while having a properly administered trust?
jj
 
Posts: 105
Joined: Sun Mar 04, 2007 10:44 am
Location: Texas

Trust service prices

Postby shawcroft » Fri May 27, 2011 10:05 am

afan:
Yes, I did ultimately get cost information from all of the companies I listed. For two (USAA and Vanguard), it was from their website. Vanguard was easy- However, I had to poke around the USAA site to finally find it. I'm not suggesting that USAA isn't forthright about cost- it just wasn't intuitive where the information existed.
The others gave me the cost information at the end of the meeting, usually after they had extolled their expertise in trust management. One was quite reluctant-Merrill Lynch (probably no surprise). I had to make two follow-up phone calls to get it- the first time it was "lost in the mail" (still has never arrived). The second time- after I mentioned that I might write to Brian Moynihan for his assistance (current Chairman of Bank of America)- I got it by Federal Express the next day.
Give me a day or so to organize things.
Shawcroft
Last edited by shawcroft on Fri May 27, 2011 10:27 am, edited 1 time in total.
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby Eric » Fri May 27, 2011 10:20 am

afan wrote:It implies that most of the trust companies earn a large share of their profits from the fees they charge for investment management, rather than fees for the trust services.


Exactly right.

afan wrote:One could imagine an alternative business model where they charged for the non investment services, then offered a choice of 1. active management by the trust company, 2. passive management by the trust company or 3. management by some other manager of your choice. For option 3 the trust company would need to be comfortable that they would not be sued if the beneficiaries were unhappy with the performance of the outside manager.


There is movement in that direction, with the advent of "directed trustees" (where one person or entity serves as trustee, but someone else directs the investments). Some states, such as Delaware, have modified their trust laws to facilitate this by addressing the liability concern you mention. In other states you may be able to accomplish something similar with a co-trustee arrangement (though that's less protective of the trustee, leaving more liability exposure that may increase their costs).

jj wrote:Your lawyer will push you toward whoever they are used to using.


Perhaps. But there are both good and bad sides to that. A lawyer knows more about a trustee he is used to working with, for better and worse. You can learn things that way you can't learn from scanning an institution's web site. Also, if the lawyer knows people at a particular institution then he may be better able to intercede on your behalf if there is a problem. But yes, you have to balance those potential benefits against the lawyer's possible bias.
User avatar
Eric
 
Posts: 608
Joined: Fri Feb 23, 2007 6:44 pm
Location: Texas

corporate data

Postby Eric » Fri May 27, 2011 12:20 pm

BTW, you may find this site to be of interest. Among other things, it indicates that Vanguard's trust company had about $700 million under management in "personal trust and agency accounts" as of 12/31/2010. (The trust company's total assets under management are much higher, as it also holds funds under employee benefit plans and other arrangements. But that's a different kind of role.) There were a total of 540 managed personal trust and agency accounts. So it looks like the average account size is about $1.3 million. (Assuming I'm reading all this right -- please do your own due diligence and confirm with Vanguard if it's important to you.)

The number of accounts seems small, but the trust company began operations only about a decade ago so there hasn't been a lot of time for testamentary appointments to take effect.
User avatar
Eric
 
Posts: 608
Joined: Fri Feb 23, 2007 6:44 pm
Location: Texas

Postby afan » Fri May 27, 2011 4:13 pm

When I did estate planning I found an outstanding attorney, who was recommended by the trust department of my bank, which is one of the larger ones in the trust field. He was flattered by this, but said many times

1. "you do not need a corporate trustee for the foreseeable future"

2. "if you ever do, make sure the trustee can be changed if you, or your beneficiaries become unhappy with them. There are ways to do this that still protect against an irresponsible beneficiary seeking a trustee who will let them blow it all on fancy cars, etc"

3. "The trust department at Bank X (which had recommended him) is perfectly fine, but I don't work for them, there are plenty of other departments that do a good job, and YOU DON'T NEED A CORPORATE TRUSTEE"

He was not against corporate trustees overall, worked with them all the time. He just said that my situation did not call for one.

So, if you are lucky enough to get the right attorney, you stand a good chance of getting valuable and unbiased advice.
afan
 
Posts: 907
Joined: Sun Jul 25, 2010 5:01 pm

Postby asset_chaos » Fri May 27, 2011 9:28 pm

From what I learned on setting up a trust I would recommed to always name a corporate trustee at least as a backup trustee. After all, what happens if the trustee person becomes incapacitated? Someone will have to be able and willing to take over the trust. If no backup trustee is named in the trust document, I believe most state laws would appoint the state trustee.
Regards, | | Guy
asset_chaos
 
Posts: 869
Joined: Tue Feb 27, 2007 7:13 pm
Location: Melbourne

Postby JDCPAEsq » Fri May 27, 2011 9:57 pm

asset_chaos wrote:...I believe most state laws would appoint the state trustee.


I've never heard of this possibility. Do you have some authority for this?
Never in my entire career in the trust business have I ever heard of a state acting as a trustee.
John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

Trust service prices

Postby shawcroft » Sat May 28, 2011 9:49 am

afan asked that I post the trust account fee information I have gathered over the past several months.

To keep the comparisons as close as possible, all of these would have the organization act as the investment advisor. Some (Wells Fargo, Chase as examples) do offer limited trust services at a lower fee. This is when they provide trust administration but not investment advisory services ( a "Directed Trust"). I am not, at the moment, considering that option.

Here goes:

Bank of America/US Trust: 1.25% on first 2 Million, 0.90% on next 3 Million, and 0.60% on next 5 Million.

Bank of America/Merrill Lynch: Anywhere from 0.75%-3.00% on first $500,00 depending on whether the assets are only in mutual funds or more broadly diversified. All of these accounts come with a “financial advisor”, whether or not you want one.
There are several different accounts available (with all sorts of additional fees which may apply). I selected the ML “Wealth Diversified Portfolio” which most closely compares to the accounts offered by the other institutions listed below.
ML Wealth Diversified Portfolio: 2.05% on first Million, 1.55% on second Million, 1.20% on next 2 Million, and 1.05% on next 6 Million.

HSBC: 0.50% on first $2 Million, 0.40% on next $3 million

Peoples United Bank: 1.00% on first Million, 0.80% on second Million, 0.60% on next 3 Million, and 0.40% on next 5 Million.

Wells Fargo: 1.25% on first 2 Million, 0.80% on next 3 Million, and 0.60% on next 5 Million.

Fidelity: 1.10 % for first $500,000, 0.80% for next $500,000, 0.70% for next 1 Million, and 0.40% for next Million.
For assets above 3 million, a flat rate applies: 0.65% for 3-4 Million; 0.55% for 4-5 Million; 0.50% for 5-6 Million; 0.45% for 6-7 Million; 0.38% for 7-8 Million and 0.30% for 8 Million or more. (These are the maximum annual new advisory fees listed on line and the more voluminous brochure sent me lists adjustments which result in a somewhat lower "Variable Net Advisory Fee").
I don't fully understand Fidelity's trust services and I have more to do to attain enlightenment.

Chase Manhattan: 0.95% on first Million; 0.70% on next 4 Million, 0.50% on next 5 Million and 0.25% on balance over $10 Million.
(Curiously, JPMorgan which owns Chase Manhattan lists slightly higher fees in their 2008 “Trust and Custody Fee Schedule. 1.15% on first Million, 1.00% on next 2 Million; 0.80% on next 2 Million; 0.60% for next 5 Million; and 0.50% for the following 5 Million.) This was the first trust fee schedule I received when we began this educational effort in the Spring of 2010. In light of the banking industry travails, I find it hard to believe trust fees would be reduced.

USAA: Strategic Fund Advisor “Marketplace Portfolio” (no USAA funds)
1.05% on first $125,000; 0.90% on next $125,000, 0.65% on next $250,000, 0.40% on next $500,000 and 0.25% on anything over $1,000,000.
Strategic Fund Advisor USAA Portfolio ( all USAA mutual funds)
USAA Global Opportunities Portfolio (mixture of investments)
0.70% on first $125,000; 0.65% on next $125,000; 0.50% on next $250,000; 0.30% on next $500,000n and 0.20% on anything over $1,000,000.
(USAA has an annual gross account fee of from 1.80%-1.96% reduced by a credit of from 0.91% -1.10% which largely- but not completely- reflects the USAA funds in the account) While the account management philosophies and charges are clearly described. the “gross-minus credit = net fee struck me a curious practice.

Vanguard: Investment management fee 0.75% on first Million, 0.35% on second Million, and 0.20% on anything above 2 Million. An additional $2500 annual Trust Administration fee for applies for each sole or co-trustee registration.

To keep this post short, I won't add anything further. I will post a follow-up message with some thoughts shortly about the overall experience during the past several months.
Shawcroft

PS- it is possible some of these fees have changed a bit since I began this effort in June of 2010.
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby asset_chaos » Sat May 28, 2011 8:26 pm

JDCPAEsq wrote:I've never heard of this possibility. Do you have some authority for this?
Never in my entire career in the trust business have I ever heard of a state acting as a trustee.
John

Sorry, that's my silliness. I got confused with Australia where my wife has a trust. There there's a state trustee who takes over trusts left without a functioning trustee, also intestate estates, and they manage money for state trust funds.
Regards, | | Guy
asset_chaos
 
Posts: 869
Joined: Tue Feb 27, 2007 7:13 pm
Location: Melbourne

More thoughts on evaluating trusts

Postby shawcroft » Sat May 28, 2011 8:27 pm

A few more thoughts:

When we started looking again at revocable trusts about a year ago , our accountant suggested we use a bank as (at least) co-trustee since they would (in theory) be around after we might both be gone. That made sense to us. However, after my conversations with Bank of America (and their Merrill lynch group), I knew this was going to be far more complex- and potentially costly- than I had expected. Discussions with the Bank of America’s US Trust operation were somewhat better than with Merrill Lynch but I was still very uneasy. Too many questions which were not answered fully. My wife sensed my discomfort but didn't know exactly what was wrong.
So, I decided to "grind it out"- I listed for her all the likely purveyors of trust services which we could use in the area- and a few others we might use that did not have a presence in the area (USAA and Vanguard). With questions and checklist in hand (but no malice aforethought) I made appointments and went out to chat and learn.
Because of my past sales experiences, I decided not to bring my wife to the initial meetings When we looked for a new auto years ago, the sales representative kept trying to “sell” HIS car to US by focusing on HER preferences. From this experience, I suspected the trust folks would direct their questions at discovering HER preferences. Once they knew she had a preference for “bricks and mortar” and “face-to–face contact”, they would be likely to focus on that and gloss over my more detailed questions about investment practices, administrative processes, and costs.
Folks who know me know that I can be quite direct (abrasive is a more accurate word) when given non-responsive answers my questions or when I sense I am being fed “bull****”. I am usually, but not always, successful in containing that behavior when my wife is around.
I’ve assembled a “spreadsheet” and gone over the materials I obtained from the meetings with my wife. We’ve narrowed it down to Vanguard, Fidelity, Chase Manhattan and Wells Fargo. To me, Vanguard is the favorite. But, I have to finish all of the reviews I decided to do when I determined that I would “grind it out”.
Press on, regardless.
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Postby asset_chaos » Sat May 28, 2011 8:34 pm

Actually, now I'm curious. What does happen to an American trust if the trustee person can't continue (dies, for instance) and no successor trustee is specified in the trust documents?
Regards, | | Guy
asset_chaos
 
Posts: 869
Joined: Tue Feb 27, 2007 7:13 pm
Location: Melbourne

Postby JDCPAEsq » Sat May 28, 2011 8:45 pm

asset_chaos wrote:Actually, now I'm curious. What does happen to an American trust if the trustee person can't continue (dies, for instance) and no successor trustee is specified in the trust documents?


If there is no provision in the trust naming a successor or mechanism for appointing a successor trustee, one will be appointed by the court. An old maxim of the law is that a trust will not fail for want of a trustee.

John
JDCPAEsq
 
Posts: 1835
Joined: Mon Mar 05, 2007 4:58 pm
Location: Southwest Florida

"Delaware Directed Trusts"

Postby shawcroft » Mon May 30, 2011 9:25 am

An update to expand on some of my earlier posts and to respond to a few PM’s which I have received.

I’ve been asked if I had considered what is called a “Delaware Directed Trust” From my reading and conversations, this arrangement seems to compensate the trust company just for fiduciary administration of the trust (custody of assets, fiduciary accounting and recordkeeping, disbursements and perhaps calculation of taxes owed) It does not involve any investment selection, advice or activities.

If anyone has a better ( or more understandable) definition of this, please let us know!

In addition to investment selection and administrative management of a trust, at least two of the trust organizations I spoke with do offer the option of a “Delaware Directed Trust”. These were HSBC and Chase Manhattan. Wells Fargo mentioned having the capability to me but I never got a fee schedule from them which described the service.

The costs of a Directed Trust:

HSBC: 0.50% on first 2 Million, 0,40% on next 3 Million, 0.30% on next 5 Million and 0.20% on the balance over 10 Million.

Chase Manhattan: 0.65% on first 1 Million, 0.50% on next 2 Million, 0.40% on next 2 Million, 0.30% on next 5 Million and 0.25% on balance over 10 Million. If you have a trust greater than 25 Million (dream on!), then a flat rate of 0.25% applies.

Although Chase will do a “directed trust”, they mentioned several times during the conversation that anything which involves “investment advice “ would trigger application of investment management fees, not just trust administration fees, to the trust.
Fair enough warning to me but a trip-wire that an inexperienced trustee could readily stumble over.

By private message, I was also informed a Delaware Directed Trust is offered by Schwab Bank but I do not have any information on this arrangement. A number of Bogleheads report having favorable dealings with Schwab on credit cards and brokerage accounts- perhaps someone who uses the Schwab directed trust service can provide their thoughts about it.

Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Vanguard Trust as successor trustee

Postby GoshenGuy57 » Wed Jun 01, 2011 10:39 pm

Would Vanguard be a successor trustee all by itself or a co-trustee with your wife? Do you know how that would work? Are they both equals or do they divide the duties
Goshen
GoshenGuy57
 
Posts: 21
Joined: Mon Feb 22, 2010 10:43 am

Trust company

Postby Mikejenny » Tue Jun 07, 2011 12:47 pm

Good information. In this area, BNY Mellon Bank also has a trust department. Anyone ever looked into them?
Mike
Mikejenny
 
Posts: 38
Joined: Wed Dec 02, 2009 12:07 am

Re: Trust company

Postby Gill » Wed Jun 08, 2011 8:53 am

Mikejenny wrote:Good information. In this area, BNY Mellon Bank also has a trust department. Anyone ever looked into them?
Mike


They're one of the premier trust institutions in the country. You won't go wrong talking to them.
Bruce
Gill
 
Posts: 1035
Joined: Sun Mar 04, 2007 9:38 pm
Location: Florida

BNY Mellon Trust Services

Postby shawcroft » Thu Jun 23, 2011 11:11 am

I hadn't thought of BNY Mellon until the suggestion was made- I've contacted them and will get some information shortly. After I've digested it, I'll post the pertinent stuff for Bogleheads to review.
Anyone out there had any experiences (good, bad, or ugly) with BNY Mellon to relate?
(I've been on a family trip recently and away from the computer- by popular demand)
Shawcroft
shawcroft
 
Posts: 745
Joined: Sun Feb 24, 2008 5:18 pm
Location: Connecticut

Re: Vanguard National Trust Company?

Postby Mikejenny » Wed Nov 23, 2011 4:07 pm

Has anyone used the trust services of BNY Mellon? I found this previous discussion and wondered if there was any more recent information on them.
Mike
Mikejenny
 
Posts: 38
Joined: Wed Dec 02, 2009 12:07 am

Re: Vanguard National Trust Company?

Postby magnus » Tue Apr 23, 2013 5:03 pm

There are many, and very interesting articles written about VNTC yet no updates since 11/23/2011. As I am giving consideration to their services, I'd be interested in anything as to one's current level of satisfaction?
magnus
 
Posts: 8
Joined: Fri Dec 24, 2010 10:58 am
Location: Sarasota FL

Re: Vanguard National Trust Company?

Postby afan » Wed Apr 24, 2013 4:16 pm

I am handling affairs for two relatives. I looked at Vanguard, but in the current low interest rate environment, even its low fees would eat up a lot of the return of a conservative portfolio.

I am also finding that most of what I do requires knowing the beneficiary. The sorts of things a stranger could do, paying bills for example, is a minor part of the work. Most of the effort is keeping track of how they are doing on other dimensions and making sure the people who provide day to day care know someone is paying attention.

That being the case, it looked like it would be a lot of money spent, with little reduction in my obligations.

I suppose if I did not have a relative to do this for me, using Vanguard would be better than nothing. I could not see using a high priced trust department any more than using a high priced broker.
"We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either." | | --Larry Swedroe
afan
 
Posts: 907
Joined: Sun Jul 25, 2010 5:01 pm

Next

Return to Investing - Theory, News & General

Who is online

Users browsing this forum: Clever_Username, Google [Bot], HAMnEGGr, Kougar2, larryswedroe, MJM, packer16, Templeton and 36 guests