Investing a trust
Posted: Thu Jan 31, 2013 11:21 pm
My two brothers and I are trustees for a trust formed by our parents. The trust is a revocable trust that was formed in Texas. The amount in the trust is in the low 7 figures. Half of the trust is in an actively managed account with AYCO. The other half will be managed by us- currently it’s in a taxable account with Schwab. Keeping things simple, we’ve decided to focus on passively managed index funds but we are also interested in having a small portion be available for us to actively select our own stocks. The 3-fund approach as discussed in the Boglehead wiki seems like a good approach. There’s no state income tax in Texas.
We have agreed upon a moderate risk allocation:
1. US Market (50%)
2. International Market (20%)
3. Fixed Income (20%)
4. Cash- 10%
Objectives of the trust:
1. To provide a security net should any of us or any member of our family need temporary help
2. To potentially provide a source of capital investment for a start-up business which we have consensus
3. To allow us or any of our children (if desired) to take reasonable risks in life such that any of us have the opportunity to make a difference
Operating Principles:
1. We intend to invest together (versus splitting it up three ways)
2. We intend to build wealth for future generations
3. We intend to each continue working until we are able to retire using our individual earning power (versus attempting to retire and live off the interest/gains and/or principal from the Trust)
4. We intend to personally direct the Trust’s investment at any given time (versus retaining an investment broker to manage it all)
Here’s what we are thinking:
US equities- VFIAX
International market- VWIGX
Bonds- VWSTX
Questions:
1. Is the allocation appropriate for our objectives?
2. Should we invest in VFIAX or a tax-managed fund like VTCLX or VTGLX?
3. With regards to the trust objectives, will VWIGX provide the appropriate allocation for developed market vs. emerging market or should it be more aggressive/less aggressive?
4. Should we be buying ETFs or mutual funds? I’m having a hard time figuring out which way will be more advantageous in regards to fees.
5. Since this is a taxable account, is there any advantage to investing in REITs?
6. For bonds, should we only invest in municipal bonds, and not treasuries/TIPS? What about a bond ladder?
7. Would it be reasonable to hold some I-bonds?
8. Would Vanguard’s intermediate-term tax-exempt bond fund (VWITX) be a better choice than the VWSTX?
We very much appreciate recommendations and advice!
We have agreed upon a moderate risk allocation:
1. US Market (50%)
2. International Market (20%)
3. Fixed Income (20%)
4. Cash- 10%
Objectives of the trust:
1. To provide a security net should any of us or any member of our family need temporary help
2. To potentially provide a source of capital investment for a start-up business which we have consensus
3. To allow us or any of our children (if desired) to take reasonable risks in life such that any of us have the opportunity to make a difference
Operating Principles:
1. We intend to invest together (versus splitting it up three ways)
2. We intend to build wealth for future generations
3. We intend to each continue working until we are able to retire using our individual earning power (versus attempting to retire and live off the interest/gains and/or principal from the Trust)
4. We intend to personally direct the Trust’s investment at any given time (versus retaining an investment broker to manage it all)
Here’s what we are thinking:
US equities- VFIAX
International market- VWIGX
Bonds- VWSTX
Questions:
1. Is the allocation appropriate for our objectives?
2. Should we invest in VFIAX or a tax-managed fund like VTCLX or VTGLX?
3. With regards to the trust objectives, will VWIGX provide the appropriate allocation for developed market vs. emerging market or should it be more aggressive/less aggressive?
4. Should we be buying ETFs or mutual funds? I’m having a hard time figuring out which way will be more advantageous in regards to fees.
5. Since this is a taxable account, is there any advantage to investing in REITs?
6. For bonds, should we only invest in municipal bonds, and not treasuries/TIPS? What about a bond ladder?
7. Would it be reasonable to hold some I-bonds?
8. Would Vanguard’s intermediate-term tax-exempt bond fund (VWITX) be a better choice than the VWSTX?
We very much appreciate recommendations and advice!