Choosing a Trustee/Vanguard trust services?

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Jill07
Posts: 133
Joined: Sat Mar 24, 2007 6:19 am

Choosing a Trustee/Vanguard trust services?

Postby Jill07 » Thu Mar 27, 2008 4:00 pm

Does anyone have experience with Vanguard Trust Services? We’re trying to figure out who should be trustee for money our children would inherit if we are gone. Don’t want them getting everything at 18 & 20 years of age. We could use my brother and BIL as co-trustees. However, they don't have much financial experience.

I would appreciate it if anyone wants to share how they handled this.


Thanks,

Jill

asset_chaos
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Location: Melbourne

Postby asset_chaos » Thu Mar 27, 2008 8:54 pm

Talk to an experienced, full-time trust and estate planning lawyer. From my experience you can set up a trust to be very flexible to reflect your wishes. For instance, there was no problem in giving the children limited portions of their inheritance as they attain particular ages, e.g. 20% at 25, 50% at 35, etc, while allowing the trustee to give out whatever is fair for any "worthwhile" purpose, e.g. grad school, house downpayment, starting a buisness, etc. Not to mention allowing the trustee to withhold disbursement in case of bad circumstances, e.g. divorce, addiction, excessive debt, etc.

We chose Vaguard Trust services to be a co-trustee and backup trustee. We chose my sister to be a co-trustee and split the trustee responsibilities. The family member trustee decides discretionary disbursements and whether something is "worthwhile"; Vanguard handles investments, tax, and regulatory paperwork. If the family member can't or won't continue in the trustee role, Vanguard takes over all trustee functions. We chose Vanguard because even here cost matters and Vanguard's corporate structure made us more confident that Vanguard was most likely to always put our family's interests first.

That's us. Your needs and interests may be best served by a very different trust structure and possibly by a different corporate trustee. Best wishes for what can be a difficult task.
Regards, | | Guy

Jill07
Posts: 133
Joined: Sat Mar 24, 2007 6:19 am

Postby Jill07 » Fri Mar 28, 2008 4:04 am

Guy -

Thank you for your response. I like the idea of having Vanguard as coTrustee and a backup trustee. If we didn't have a corporate coTrustee, my brother and BIL would have to hire help anyway. I think it would be too much of a burden for them to manage the money, taxes etc. We will work with an estate lawyer.

Appreciate your response,

Jill

TimDex
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x

Postby TimDex » Fri Mar 28, 2008 8:25 am

Make sure to get the package that Vanguard asset mgt. provides. It includes a lot of specific language to be included in your will establishing a trust if Vanguard is to be included. It's downloadable. Tim
"All man's miseries derive from not being able to sit quietly in a room alone. " -- Pascal

PatrickS
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Postby PatrickS » Fri Mar 28, 2008 8:42 am

We just set this up ourselves with Vanguard as the trustee. Their fees are pretty reasonable and are tiered so the larger the estate, the lower the rate. My estate attorney was advising against an institutional fudiciary because of costs. Apparently he's never heard of using Vanguard because he thought a "normal" fee would be around 3%.

We also included disbursements of percentages of the estate at specific ages for our daughter.

InvestingMom
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Postby InvestingMom » Tue Apr 08, 2008 3:15 pm

I am also interested in using Vanguard National Trust co (which is a sub of Vanguard). Does anyone know if they invest in Vanguard funds only or whether you can specify that they only invest in certain funds. I also wonder if you can specify the asset allocation plan or can you rely on them to come up with a reasonable plan since it would be their fiduciary responsibility!

Also, does anyone know whether the trustee fees include the fund expense fee? In other words, for trustee services they charge .75% for the first million. Do they credit you back the .15-.20 of fees that are charged through the mutual fund (Vanguard funds) as an investor? Or are you still charged the expenses of .15-.2 plus the .75%?

Lastly, I wonder where you can find out if they are responsive and efficient with paperwork and disbursements? I will be using a co-trustee and I don't want this person to struggle with a slow and inefficient co-trustee/manager.

Amaranth
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Re: Choosing a Trustee/Vanguard trust services?

Postby Amaranth » Tue May 07, 2013 1:48 pm

Does anyone have any current experience with Vanguard as trustee of a trust? I'm looking for experience where Vanguard is actually currently acting as trustee. Thanks for any help.

stjoe56
Posts: 273
Joined: Wed Oct 03, 2007 9:39 pm
Location: Nevada

Re:

Postby stjoe56 » Tue May 07, 2013 4:55 pm

InvestingMom wrote:I am also interested in using Vanguard National Trust co (which is a sub of Vanguard). Does anyone know if they invest in Vanguard funds only or whether you can specify that they only invest in certain funds. I also wonder if you can specify the asset allocation plan or can you rely on them to come up with a reasonable plan since it would be their fiduciary responsibility!


In short no. They invest in only their funds and you basically have to give them complete discretion into what to invest in. In my experience, you basically get a total stock market, a total bond fund (maybe no longer due to low fed interest rates) and an international

InvestingMom wrote:Also, does anyone know whether the trustee fees include the fund expense fee? In other words, for trustee services they charge .75% for the first million. Do they credit you back the .15-.20 of fees that are charged through the mutual fund (Vanguard funds) as an investor? Or are you still charged the expenses of .15-.2 plus the .75%?


Fund fees are in addition to the trustee fees

InvestingMom wrote:Lastly, I wonder where you can find out if they are responsive and efficient with paperwork and disbursements? I will be using a co-trustee and I don't want this person to struggle with a slow and inefficient co-trustee/manager.


The beneficiary who works with them says they are efficient with paperwork and disbursements.

SJ

stjoe56
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Location: Nevada

Re: Choosing a Trustee/Vanguard trust services?

Postby stjoe56 » Tue May 07, 2013 5:04 pm

bethny wrote:Does anyone have any current experience with Vanguard as trustee of a trust? I'm looking for experience where Vanguard is actually currently acting as trustee. Thanks for any help.

I have seen both the good and the bad about using Vanguard as a trustee. It is currently acting as the sole trustee on an irrevocable trust I established for a child. I was the trustee until my estate lawyer mentioned that a change in state law might mean the trust got included in my estate. Hence I resigned and hire Vanguard. Overall it has done a good job. It is a barebone operation and consequently much cheaper.

I later hired it to be asset manager for my own portfolio. Due to a difference of opinion we went our separate ways.

I am now probably going to hire US Trust Company of New York to manage my portfolio and act as trustee upon my death. UST charges about 1%. I am hiring it because of its expertise in acting as a trustee.

I have serious doubts as to Vanguard's capability in handling multiple beneficiaries with different investment goals. For example, while a lawyer, there was a testamentary trust with three beneficiaries. Two were in a high tax bracket and wanted tax-exempt bond funds. One was in low and wanted taxable bond funds. When a 2/3 and a 1/3 split was suggested, each side rejected it.

Based on my experience, when it comes to money, do not expect your children to get along. Once you are gone, it can quickly deteriorate into open warfare.

SJ

brainstem
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Re: Choosing a Trustee/Vanguard trust services?

Postby brainstem » Tue May 07, 2013 8:45 pm

I am cotrustee with vanguard for a trust for my child.

Fees low ... Gives me cover for investment results .... Vanguard rep cooperative

Beats the lawyer and his advisors I had to wrest the trust away from!

Had been advised to use local bank to allow for face to face interactions ... An over rated attribute these days

I am not esp demanding but have had no issues in getting things done and distributed over last several yrs.

You can do far worse.

mrpotatoheadsays
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Re: Choosing a Trustee/Vanguard trust services?

Postby mrpotatoheadsays » Wed May 08, 2013 12:05 am

"VNTC shall not accept or be responsible for the administration, maintenance, disposition, or sale of real estate, business assets, tangible personal property, or any other nonfinancial assets not traded on an established securities exchange ..."

So how you gonna handle your home and stuff? They just want to handle money. A trust is sometimes more than money.

bsteiner
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Re: Choosing a Trustee/Vanguard trust services?

Postby bsteiner » Wed May 08, 2013 8:13 am

The trustees' duties include investments (including hiring someone to do the investments), deciding on discretionary distributions (where the Will agreement gives the trustees discretion, as would probably be the case here), and recordkeeping (including preparing or hiring someone to prepare the income tax returns).

While most clients name individual trustees, some clients name a corporate trustee. Sometimes the client doesn't have any individuals who are appropriate, or for some other reason wants a corporate trustee. Each case is different.

Corporate trustees typically charge about 1% per year, a bit more on smaller relationships, and less on larger relationships. If they invest in their own mutual funds (which they'll do where they want to invest in an asset class but the amount involved is too small to easily buy individual securities), they'll credit their management fee at the mutual fund level (but not the other expenses of the mutual fund) against their trustee's fees.

Vanguard is less expensive than the typical bank or trust company. Vanguard charges 0.7% on the first $1 million, 0.35% on the next $1 million, and 0.2% above $2 million, plus $2,500 per year. They don't offset their expenses at the fund level against their trustee's fees. While most banks and trust companies will aggregate the assets in related trusts for purposes of the break points, I don't know if Vanguard will do this. However, Vanguard is still likely to be substantially less expensive than the typical corporate trustee, and if they invest in index funds, the trust won't incur the costs of active management.

I've only had one or two clients name Vanguard as a trustee in their Wills, and so far none of them has died, so I don't know how it will work when the time comes to set up the trusts. With a conventional bank or trust company, the beneficiaries are usually able to meet with the trust officer in person from time to time, and if need be, I can speak with the trust officer, or someone higher up. If a more complicated issue arises, there will usually be people at the bank or trust company whom I know well and can speak with. I don't know if that would be the same at Vanguard (or a similar institution).

If there are assets other than securities and mutual funds, a conventional corporate trustee will be able to deal with them, but Vanguard (or a similar institution) can't. That could be an issue if your children (or their guardian if they're minors) want to retain your home, or when the children are adults and for some reason it makes sense for their trusts to buy homes for them.

I would be interested in hearing about the experiences of others in working with Vanguard or a similar institution where the testator has died and the trusts under his/her Will have been set up.

Most clients who want a corprorate trustee give some individual or individuals the power to change the corporate trustee, so if the relationship isn't working out, or if due to changed circumstances the bank or trust company named in the Will is no longer appropriate, there's a way to change to a different bank or trust company.

stjoe56
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Location: Nevada

Re: Choosing a Trustee/Vanguard trust services?

Postby stjoe56 » Wed May 08, 2013 10:31 am

mrpotatoheadsays wrote:"VNTC shall not accept or be responsible for the administration, maintenance, disposition, or sale of real estate, business assets, tangible personal property, or any other nonfinancial assets not traded on an established securities exchange ..."

So how you gonna handle your home and stuff? They just want to handle money. A trust is sometimes more than money.


In a personal experience, I and BofA were trustees of my mother's estate. There was a great deal of bickering (that is putting it mildly) among the beneficiaries as to who got what. No matter what I said or suggested, it was vehemently rejected by the others. So the corporate threatened to exercise its nuclear bomb option: everything (and I mean everything) would be sold at auction. Everybody finally shut up and I disposed of the property by putting a tag on everything and the beneficiaries went round robin selecting a item. There was still a great deal of animosity. If I had to do it all over again, the nuclear option would have been exercised from the get go.

Then there was the family vacation home of a friend of mine. Of four children, the two who lived closest wanted to keep it. The other two didn't. Again there was much bickering, so the corporate listed it for sale. It told the two of wanted to it that they could buy it on the open market. House went for twice it pre-estimated value

Jewelry story: Mother had a great deal of nice jewelry to be divided among the four children. Again much debate as how to divide it. Two of the daughters finally said the only male heir should just take cash instead of the jewelry. When the male said, no, he had a wife and daughter that wanted some of the pieces, there was some rumbling that it was not fair that the jewelry would be going outside the family. Again the corporate came in and said, either all got a fair share or it would all be sold.

Finally there are two US Trust stories told to me one day at lunch.

First: Two 50 year siblings and last parent died. Then the bickering started with every slight and injury from childhood forth got brought forward. Turns out they really disliked each other.

Second: US Trust allegedly stores a family silverware. Each time a family member wants to use it, UST collects a refundable bond and ships it out. When it is returned, the bond is refunded. No member trusts the other to store and each demanded that they wanted it.

SJ

lhl12
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Re: Choosing a Trustee/Vanguard trust services?

Postby lhl12 » Mon Jun 03, 2013 5:54 am

bsteiner wrote:I would be interested in hearing about the experiences of others in working with Vanguard or a similar institution where the testator has died and the trusts under his/her Will have been set up.


+1

osageryder
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Re: Choosing a Trustee/Vanguard trust services?

Postby osageryder » Fri Apr 08, 2016 11:02 am

I was not aware that Vanguard had a trust service. I just looked and their fees are less than half what my son is paying Wells Fargo to manage a trust left to him by his grandmother. Their fees are almost as much as his portfolio produces annually. Not to mention I would feel so much more comfortable with Vanguard anyway, given that my wife and I already have Vanguard portfolios. I have not had much luck discussing details with the WF portfolio manager. So I'm really pleased that I saw your post, and I would also welcome comments from anyone with first hand experience with VG trust services. thanks!

Small Law Survivor
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Re: Choosing a Trustee/Vanguard trust services?

Postby Small Law Survivor » Fri Apr 08, 2016 11:14 am

I am quite interested in doing this for my daughter, so reading these comments about Vanguard's trust services is helpful.

However - I would want to stipulate a more diversified slice/dice portfolio, with small cap, emerging, REITs, and so forth. Will Vanguard decline to implement that?

Small Law Survivor

afan
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Re: Choosing a Trustee/Vanguard trust services?

Postby afan » Fri Apr 08, 2016 11:54 am

I have not used Vanguard for trust services. We do use them for the endowment of a nonprofit. We are very happy with their investment work and they were quite receptive when we told them we wanted to eliminate active funds and go to a small number of lowest cost index funds. This was years ago, I don't know whether they still recommend active funds.

That said, we don't get much sense of flexibility from them. My impression of our account rep is that there is a central committee that makes investment decisions and he conveys that to us. For this entity that is fine. If someone had a unique situation and did require a more customized portfolio I don't know how well Vanguard would manage that.

When I was searching for a corporate trustee for a trust of which I am trustee, they did not explicitly say that they would invest only in Vaguard funds. They definitely said they would be cognizant of capital gains taxes for existing assets. Since I am happy with a handful of cap weighted funds that would be fine going forward.

That same search included a number of large traditional bank trust departments. I found their fees to be so high that it would violate my fiduciary duty to the beneficiary if I were to pay 1.5-2% of assets to a bank just to simplify my life.

Having had to sell a decedent's house as personal representative, that was a lot of work. If I had to do it over, maybe it would be worth it to have a bank handle everything. On the other hand, most of the work revolved around getting the house ready for sale, disposing of property to the beneficiaries, negotiating with buyers, etc. We got a good price. I never pursued it, but I suspect a bank would not have bothered to do all that work. I think they would have done something fast and cheap, and sold at a much lower price.

Our estate planning does eventually call for a corporate trustee. We are planning to use Vanguard, but have not written them into the documents. It is too far in the future, probably, to tie the hands of whoever is in charge at the time. There will be a mechanism for beneficaries to choose a corporate trustee. Years from now, who knows? Maybe there will be other companies competing on prices.

We are still figuring out what to do about real estate. We expect beneficiaries would be happy to sell it all, but that could mean hiring a traditional trust department to manage the real estate and just accepting the cost. But not for the financial assets.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Kalaloch
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Re: Choosing a Trustee/Vanguard trust services?

Postby Kalaloch » Mon Mar 20, 2017 4:42 pm

FYI if you are trying to talk to someone in their Trust Department, don't hold your breath, I've called them multiple times and every time it says they are busy on the other line and to leave a message and someone will call within 2 days.

Seems like they could hire a few more people to answer the phone if I people are trying to give them their future estates of $500,000 up to millions of dollars. I don't know about you but for someone wanting to give me that kind of future money I could get back to them sooner than 2 days.


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