I Inherited a Trust, Please Help Me Find A Trustee

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UpbeatCake
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I Inherited a Trust, Please Help Me Find A Trustee

Post by UpbeatCake » Thu Jun 27, 2019 12:13 am

TL;DR: Please help me find a corporate trustee for my trust of $450,000, mostly investment real estate.

My father died and I (age 31) inherited a trust worth around $400k-$500k. The trust has 3 residential condos (in another state), leased to tenants, plus around $80k in cash. I get 4% a year until I turn 60, then 6% a year until I die. I can take out more money for my education or for financial emergencies, and if the trust falls below $150k I get the principal. My 26-year-old sister is in a near-identical situation. My dad’s estate lawyer ($400/hour!) has been serving as the trustee since my dad’s death, but now it’s time to choose someone permanent.

Turns out, as trusts go, a trust of around $450k is really small potatoes. Per the trust documentation I need a corporate trustee that oversees at least $200 million within their trust division. So far I have emailed nine banks and trust companies. Two turned me down flat - Option A requires $1 million minimum, Option B wants at least $500,000 and real estate can comprise only 10% of total assets. I have an appointment with Option C, who already said that given their annual trust administration fee is $10k minimum, the trust’s assets will get depleted, and she doesn’t think it’s in my best interest to go with them. I will follow up with the non-responders, but am not thrilled at the prospect of handing over my money to a trustee so disinterested they can’t reply to an email.

Does anyone have any suggestions for a corporate trustee that might be a good match for me and my sister?

I am trying to do most of the research myself and use my expensive lawyer as sparingly as possible (she thinks I should sell now and go with Option B). Though I may ultimately choose to sell the real estate, I would rather not be forced into quickly selling on someone else’s timeline. I do not have any friends or family members able to give advice on this subject.

Clearly there are worse problems one might have (though I’d rather have my dad back than have this trust), but this is still a situation I’m struggling with. If you have specific suggestions of possible corporate trustees for my situation, I would be very grateful.

Gill
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by Gill » Thu Jun 27, 2019 6:16 am

I really don’t think you will find a corporate trustee willing to serve. Maybe you could ask the trust attorney about the possibility of having a court eliminate the requirement for a corporate trustee.
Gill
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Jack FFR1846
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by Jack FFR1846 » Thu Jun 27, 2019 6:24 am

Is there some reason you can't keep your current lawyer? Having paid $500 per hour myself in the last year for a lawyer, my thoughts about $400 an hour for limited services is pretty ho-hum.
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alrick
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by alrick » Thu Jun 27, 2019 6:42 am

Consider meeting with your estate planning legal counsel...if you have one.....if not, it's not too soon to select one and begin your long term estate planning, of which this trust would be a component. In this way your estate planning attorney can assist in analyzing the trust documents to see if/how changes can be made regarding trusteeship that better meets the assets held. Use this "problem" as the incentive to develop a comprehensive financial planning/estate planning program.

Ben10
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by Ben10 » Thu Jun 27, 2019 6:55 am

Corporate trustees generally don't want to oversee investment real estate. You should consult with an experienced trust and estate attorney. There may be a way to modify the trust to eliminate the requirement of having a corporate trustee or to substitute an "independent trustee" which may be an individual and not a corporation. This would generally require the consent (or at least notice to) all potential beneficiaries (current and future), and may or may not require court approval, depending on governing law.

LFS1234
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by LFS1234 » Thu Jun 27, 2019 7:10 am

Real estate is a management-intensive asset class, and one way or another, someone is either going to have to spend a lot of time dealing with this, or spend a lot of money in order to buy the time of others to deal with this. These problems are compounded by the rental condos being far away, rather than in your immediate vicinity.

Are you personally in the real estate business, or interested in being in the real estate business?

If the answer is no, I think the idea of getting these RE assets sold off as soon as practicable makes sense.

Having assets in trust will put a drag on your net returns, probably at least $5,000/year or 1% of assets/year (for a small trust) even in the best case scenario, given an easily-managed portfolio of liquid securities. Keeping the real estate assets in the trust will be much more demanding in terms of time and expertise, and therefore money. It is quite possible that you will not be able to find any qualified person who will agree to take on this responsibility for any price, let alone an acceptable one.

While interviewing potential trustees, take advantage of their expertise and ask them what they'd do in your situation. Since few if any of them are interested in this business, there is no reason they can't speak with you freely. Try to follow up by phone (or ideally, in person), rather than by just by e-mail.

In the (unlikely but possible) case that the real estate business is your life calling, you could explore the idea of becoming a co-trustee in charge of all real estate matters and having the corporate trustee relieved of the bulk of their duties. Alternatively, you could explore purchasing some or all of these real estate assets from the trust, after which you would own and manage these assets personally, and the trust would hold your notes and/or other more easily-manageable assets. If the trustee determines that these assets have to be fire-saled; why not fire-sale them to you?

The current trust document may not permit the above, but if a successor trustee cannot be found then it seems to me that you're at a dead end and a court may have to become involved in order to modify the trust as necessary. So this would be a good time to really think things through and figure out what modifications you would ask for if provided the opportunity.

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Reb Tevye
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by Reb Tevye » Thu Jun 27, 2019 7:38 am

This will be a lifelong headache if you don’t change something.

Assuming it’s allowed by the terms, find a trustee who will sell the real estate and invest in a two fund portfolio (total us stock etf + tax efficient bond) plus a money market fund. At Schwab or Fidelity.

If there at some point is no longer a need for the asset protection purposes of the trust try to dissolve it. Eg, no spendthrift risks, no greedy spouses. Eg in 15 years. Consult your own $400/hr ACTEC lawyer. Your sister, ditto.

Remember, paying 1% in lawyer+trustee fees for 60 years leaves the heirs with only 1-0.99^60 (one minus 0.99 to the 60th power)of the potential value. Eg, heirs keep 45%. The math is actually different since there are distributions, but you get the idea. Paying 2% for 60 years leaves only 30%. Throwing in accountants, property management, plumbers, roofers, painters, etc., The costs will be high.
"So, what would have been so terrible if I had a small fortune?"

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PalmQueen
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by PalmQueen » Thu Jun 27, 2019 10:39 am

I'm so sorry for your loss.

In my (not an attorney) opinion, whoever drafted your father's trust documents put his heirs in a position in which it is impossible to implement the terms of the trust.

I agree with previous posters that the best course of action would be to have the courts remove the corporate trustee requirement from the trust.
Is your father's estate attorney that you've been working with the same attorney who drafted the trust?
If so, they have some explaining to do as they should have known they were including conditions that would be disadvantageous to the heirs.
One outcome of the way it was written was increased fees to the attorney.

You're taking good steps in researching corporate trustees and seeking advice from the Bogleheads.

Below are some random ideas of areas to pursue:
1- Research financials of the real estate. They're rented condos so may be easier for you to manage from a distance than other types of real estate. Do a cost analysis of each property and if the cash flow is positive you may decide you want to hold onto them for a while.
2- Generally banks/trustees will fire sale any real estate. It's not their core business and they just want to move it off their books. If you decide to sell the condos and can get permission to get them out of the trust you should be able to work directly with a local realtor.
3- Establish a relationship with a good CPA. They're used to dealing with trusts/trustees and can also help you with decisions related to tax consequences of decisions you will make. They could be invaluable in helping you figure out what you can/should do, even as relates to fixing the restrictive corporate trustee conditions.

not4me
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by not4me » Thu Jun 27, 2019 12:31 pm

Several scattered thoughts, but 1st sorry for your loss & I appreciate you preferring your Dad over the trust.

Find a credit union near one of the units & call them. Some credit unions have affiliations that can aggregate small customers into bigger. Ask for their ideas. Offer business if possible (cash in trust has to be somewhere).

The current lawyer doesn't seem to fit the criteria either... is there a limit on how long they can be trustee? Could another (presumably less expensive) attorney take it on? These sound like smaller units. The day to day operation/management is really a separate function from the trustee role. Is there, or might there be, a manager to handle that?

I appreciate you not wanting to make a forced decision on selling; usually best to not make decisions on inheritances in haste. But also know, that this might actually be a good time to sell. I wouldn't rule it out, but rather consider the tax situation and prospects. Take them one at a time perhaps. If nothing else, you'll get a better feel for what you have & prospects going forward. Of course selling doesn't make trust big enough necessarily, but removes the real estate aspect.

psteinx
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by psteinx » Thu Jun 27, 2019 12:39 pm

Reb Tevye wrote:
Thu Jun 27, 2019 7:38 am
Remember, paying 1% in lawyer+trustee fees for 60 years leaves the heirs with only 1-0.99^60 (one minus 0.99 to the 60th power)of the potential value. Eg, heirs keep 45%. The math is actually different since there are distributions, but you get the idea. Paying 2% for 60 years leaves only 30%. Throwing in accountants, property management, plumbers, roofers, painters, etc., The costs will be high.
While a pricey trust obviously has costs, your example math isn't really correct.

Cost of administration should be roughly viewed as a drag on gross distributions. A perpetual entity that would otherwise distribute 8%, but distributes only 6% due to frivolous 2% charges, is worth about 25% less than a comparable unencumbered entity. For non-perpetual entities, the math is different. That said, for a lifetime trust with the primary benefiary being 31, in normal cases, the math would be close to that of a perpetual entity.

123
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by 123 » Thu Jun 27, 2019 4:03 pm

I agree with the recommendations expressed that you should seriously consider having the real estate assets in the trust sold. Those assets just complicate the expense of the administration of the trust and your ability to find a suitable corporate trustee. Leased property can be difficult to sell while it remains under lease since the buyer is required to honor the terms of the lease unless there is a buy-out of the lease. You may want to investigate potential sales opportunities of the properties ahead of any discussion about it with the trustee of the trust. If the condo complexes are large there may be a lot of comparable sales information available online. You may want to monitor on-going sales at the developments to see how sales proceed. Lots of times there are one or two real estate agents who specialize in a particular condo development and they know the property and the sales activity inside-out, sometimes it can be a good idea to chat with them. Often the HOA office will know what real estate agents are most active with a property if you can't tell from recent property ads.
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Reb Tevye
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by Reb Tevye » Thu Jun 27, 2019 5:01 pm

psteinx wrote:
Thu Jun 27, 2019 12:39 pm
Reb Tevye wrote:
Thu Jun 27, 2019 7:38 am
Remember, paying 1% in lawyer+trustee fees for 60 years leaves the heirs with only 1-0.99^60 (one minus 0.99 to the 60th power)of the potential value. Eg, heirs keep 45%. The math is actually different since there are distributions, but you get the idea. Paying 2% for 60 years leaves only 30%. Throwing in accountants, property management, plumbers, roofers, painters, etc., The costs will be high.
While a pricey trust obviously has costs, your example math isn't really correct.

Cost of administration should be roughly viewed as a drag on gross distributions. A perpetual entity that would otherwise distribute 8%, but distributes only 6% due to frivolous 2% charges, is worth about 25% less than a comparable unencumbered entity. For non-perpetual entities, the math is different. That said, for a lifetime trust with the primary benefiary being 31, in normal cases, the math would be close to that of a perpetual entity.
I do wish the OP and sister condolences and peace.

I don’t want to derail too far from the poster’s question... and I’m no trust or real estate wizard...

I acknowledge your notions of a perpetual entity and income impact to the OP cash-wise. But this being Bogleheads and given our many “tyranny of fees” discussions, I think I’ll directionally stick with my story to the OP since there must (AFAIK) ultimately be heirs to the principal.

Or perhaps all parties really want these out-of-state condos come what may, fees, costs and otherwise.

(and I mistyped my original post... meant to write ‘keep 55%,’ not 45%)
"So, what would have been so terrible if I had a small fortune?"

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FIREchief
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Re: I Inherited a Trust, Please Help Me Find A Trustee

Post by FIREchief » Thu Jun 27, 2019 5:06 pm

UpbeatCake wrote:
Thu Jun 27, 2019 12:13 am
TL;DR: Please help me find a corporate trustee for my trust of $450,000, mostly investment real estate.

My father died and I (age 31) inherited a trust worth around $400k-$500k. The trust has 3 residential condos (in another state), leased to tenants, plus around $80k in cash.
Are the condos owned debt free or do they have mortgages? Is the $400K - $500K the amount of equity or the approximate market values?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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