I'm beside myself about my dad's investment account

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theladybug123
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I'm beside myself about my dad's investment account

Post by theladybug123 » Fri Jul 05, 2019 8:59 pm

Five years ago my father (88 years old now), when he was of sound mind, worked with a lawyer to make an irrevocable trust so that down the road he could qualify for Veteran's Aide and Assistance benefits. My dad has been in assisted living for the past 10 years because he had a stroke with partial paralysis and my mom, whom he was married to for 50 years, had passed away. I have Power of Attorney and pretty much have taken him to all his doctors' appointments and deal with his finances. He has been on long term care insurance for the past five years, and we are hoping to qualify for Veteran's benefits since the LTC insurance is ending. Here's my problem.

Five years ago the lawyer gave him a name for a financial advisor who could help with investing money in irrevocable trusts. We moved everything to a managed account. It was great because I felt it was above board, and I didn't have to worry about anyone thinking I was misusing my dad's money. I met with the advisor last week. My dad's account has averaged 0.9% growth over the last five years when you take into account the fees that have been deducted. That is not even keeping up with inflation. The investments are conservative so he wouldn't lose his nest egg, but it is still so low. We are talking around $200,000. My dad now has dementia and I feel very responsible. He does okay with a small pension and social security, along with the long term care insurance which will end shortly. Between his income and Veteran's benefits, he won't really need to dip into the account at first, although care cost does continue to rise. He has lifetime supplemental insurance through his former work place, so his only costs are his assisted living facility.

Does anyone have any advice? I don't want to take risks with his money, but anything would probably be better than his managed account. I thought maybe even a CD or something. My own investments are in Vanguard, but I don't know if they do trusts and what I would even put it in.

Help! Any advice would be appreciated.

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Re: I'm beside myself about my dad's investment account

Post by Jack FFR1846 » Fri Jul 05, 2019 9:22 pm

Any high yield account will return north of 2%. Easiest way to more than double what he's been getting.
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123
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Re: I'm beside myself about my dad's investment account

Post by 123 » Fri Jul 05, 2019 9:22 pm

The safest option for investing the account would be certificates of deposit, brokered CDs are available through Vanguard.

A reasonable mix would be mostly bonds with something like 20% stocks. Vanguard LifeStrategy Income Fund would do it all in a single fund.
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mhalley
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Re: I'm beside myself about my dad's investment account

Post by mhalley » Fri Jul 05, 2019 9:23 pm

You might find this thread helpful. I think Vanguards has a 500k minimum for trusts.
viewtopic.php?t=208409

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Re: I'm beside myself about my dad's investment account

Post by Grt2bOutdoors » Fri Jul 05, 2019 9:26 pm

Five years ago, interest rates were much lower. Without knowing specifics of what your father's account was invested in, and after accounting for fees, the rate of return does not seem outlandishly low. However, if you are able to move the investment account to Vanguard or Fidelity, you'd likely do better just investing in plain-vanilla certificates of deposit and highly rated money market funds. Better, meaning you might earn 2 to 2.5% if you can avoid the current investment manager's fee. Current new issue cd rates shown on Vanguard's website indicates rates of roughly 2% in the 6 month to 2 year bucket. US Treasuries are currently paying around the same. Money market funds like Federal Money Market is about 2.3% but that is a variable rate that floats based on prevailing interest rates of the securities it holds in the fund.
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Re: I'm beside myself about my dad's investment account

Post by 123 » Fri Jul 05, 2019 9:30 pm

Is the trust account situation really that important? Are there other potential beneficiaries in addition to yourself to his estate? Maybe just a regular account with yourself with trading authority would suffice (since you have POA)?
The closest helping hand is at the end of your own arm.

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theladybug123
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Re: I'm beside myself about my dad's investment account

Post by theladybug123 » Fri Jul 05, 2019 9:40 pm

The trust is important so that he qualifies for Veteran's benefits. I have a brother and sister who would also be beneficiaries if anything is left. They are hands off and trust me to do my best.

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theladybug123
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Re: I'm beside myself about my dad's investment account

Post by theladybug123 » Fri Jul 05, 2019 9:44 pm

mhalley wrote:
Fri Jul 05, 2019 9:23 pm
You might find this thread helpful. I think Vanguards has a 500k minimum for trusts.
viewtopic.php?t=208409
Thanks. I've started reading through the whole thread.

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Re: I'm beside myself about my dad's investment account

Post by AlohaJoe » Fri Jul 05, 2019 9:45 pm

Grt2bOutdoors wrote:
Fri Jul 05, 2019 9:26 pm
Five years ago, interest rates were much lower. Without knowing specifics of what your father's account was invested in, and after accounting for fees, the rate of return does not seem outlandishly low.
I also don't see the reason for the outrage unless there's more to the story than the post provides. Go look at 5-year Treasury yields from 5 years ago:

https://fred.stlouisfed.org/series/DGS5

1.3%, 1.2%...in 2016 it was under 1% briefly. Even with completely reasonable trust & advisor fees, it is pretty easy to go from 1.3% to 0.9%.

It seems like the real problem is that the dad didn't want to take any risk, during a period when risk-free rates were low. I'd blame the dad, not the advisor, if you're going to blame anyone. But shouldn't the dad be able make that kind of choice for his own investments?

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willthrill81
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Re: I'm beside myself about my dad's investment account

Post by willthrill81 » Fri Jul 05, 2019 10:12 pm

I agree that CDs sound like a great choice at this point. 5 year CDs that pay 3.5% are available at this moment. A CD ladder might be the best option if you believe that he'll potentially need some of these funds soon.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: I'm beside myself about my dad's investment account

Post by willthrill81 » Fri Jul 05, 2019 10:14 pm

AlohaJoe wrote:
Fri Jul 05, 2019 9:45 pm
Grt2bOutdoors wrote:
Fri Jul 05, 2019 9:26 pm
Five years ago, interest rates were much lower. Without knowing specifics of what your father's account was invested in, and after accounting for fees, the rate of return does not seem outlandishly low.
I also don't see the reason for the outrage unless there's more to the story than the post provides. Go look at 5-year Treasury yields from 5 years ago:

https://fred.stlouisfed.org/series/DGS5

1.3%, 1.2%...in 2016 it was under 1% briefly. Even with completely reasonable trust & advisor fees, it is pretty easy to go from 1.3% to 0.9%.

It seems like the real problem is that the dad didn't want to take any risk, during a period when risk-free rates were low. I'd blame the dad, not the advisor, if you're going to blame anyone. But shouldn't the dad be able make that kind of choice for his own investments?
I agree. Since 2014, short-term Treasuries have averaged 1.18% nominal annualized returns.

It can be easy for someone with any knowledge of the stock market to look back with disgust at such a low return, but many 80 somethings are very fearful of stocks, believing them to be little or no better than a casino.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: I'm beside myself about my dad's investment account

Post by Strayshot » Fri Jul 05, 2019 10:17 pm

Sounds like he is in fixed income and getting 1-3% over the last few years minus what is probably 1%+ for the “advisor”. Fire the advisor and double your return.

suemarkp
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Re: I'm beside myself about my dad's investment account

Post by suemarkp » Fri Jul 05, 2019 10:20 pm

Is this the return of just the investment and advisor fees, or does it include the trust fees? I looked into setting up a trust when my wife died, and no one said it was worth it unless you had $1M or more because of the fees involved.
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Re: I'm beside myself about my dad's investment account

Post by SoonerD » Fri Jul 05, 2019 10:42 pm

Theclady bug, the dramatic title doesn’t help matters. If you’re the one responsible for your fathers wellbeing calm in the storm is often a good demeanor.

Father is responsible party for selecting the advisor, the investment policy, and the performance until his mental acuity declined to the point of needing you to step in.

Is the trust set up to benefit him, then money market like instruments is appropriate if for you and siblings then you can invest according to your needs instead of his. If it were my father I would keep it in money market fund, fire the advisor and spend it on my father if there is any way to allow that.

Regardless you’ve not presented any information to indicate the advisor is less than perfect.

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celia
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VA Aid and Attendance

Post by celia » Sat Jul 06, 2019 2:30 am

I’d get started on that VA Aid and Attendance application right away. Here are some eligibility rules:
https://www.va.gov/pension/aid-attendance-housebound/

And more information:
https://www.payingforseniorcare.com/lon ... nsion.html

This is not a do-it-yourself application process. There are experienced organizations that can help you with the application for free. They understand what wording the VA expects. I’d suggest contacting the closest VA hospital to see what organizations are locally available to help with the application. Organizations can include:
Disabled American Vets
Veterans of Foreign Wars
American Legion

Bring along all the papers that might be relevant to help build a case on your dad’s behalf and his ID.

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Re: VA Aid and Attendance

Post by Swimmer » Sat Jul 06, 2019 7:13 am

celia wrote:
Sat Jul 06, 2019 2:30 am
I’d get started on that VA Aid and Attendance application right away. Here are some eligibility rules:
https://www.va.gov/pension/aid-attendance-housebound/

And more information:
https://www.payingforseniorcare.com/lon ... nsion.html

This is not a do-it-yourself application process. There are experienced organizations that can help you with the application for free. They understand what wording the VA expects. I’d suggest contacting the closest VA hospital to see what organizations are locally available to help with the application. Organizations can include:
Disabled American Vets
Veterans of Foreign Wars
American Legion

Bring along all the papers that might be relevant to help build a case on your dad’s behalf and his ID.

Excellent advice. We went through the VA process with my father. It took a long time. Above organizations provide valuable assistance. Once he was in the VA system, it was great.

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celia
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Re: I'm beside myself about my dad's investment account

Post by celia » Sat Jul 06, 2019 9:31 am

theladybug123 wrote:
Fri Jul 05, 2019 9:44 pm
mhalley wrote:
Fri Jul 05, 2019 9:23 pm
You might find this thread helpful. I think Vanguards has a 500k minimum for trusts.
viewtopic.php?t=208409
Thanks. I've started reading through the whole thread.
I’m assuming the OP’s father has a Special Needs Trust (in order to maintain eligibility for government benefits). The trustee of this kind of trust needs to understand changing special needs rules, which vary state to state. I question whether Vanguard or Fido are qualified to be a trustee for such a trust. Even if they are, the trustee fees may be higher than usual.

Don’t forget that trustee fees eat away at the growth of the account, no matter who the trustee is, unless you act as trustee for no pay.

michaeljc70
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Re: I'm beside myself about my dad's investment account

Post by michaeljc70 » Sat Jul 06, 2019 10:59 am

Sorry about your father. Was it all invested in fixed income? If so, after fees it is probably reasonable. I think this highlights why even someone "conservative" needs some stocks as there is a risk you don't keep up with inflation. I'd argue it is riskier to be all in things that after fees may not keep up with inflation.

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Re: I'm beside myself about my dad's investment account

Post by Wiggums » Sat Jul 06, 2019 11:09 am

I’m sorry to hear about your father. It’s nice that you are able to help him out. I think he would be well served with a conservative portfolio. I do think you need to have some equities to keep up with inflation.

Good luck to you.

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Re: I'm beside myself about my dad's investment account

Post by dbr » Sat Jul 06, 2019 11:13 am

To have arranged things to optimize benefits while also preserving the assets of a person of this age and situation is actually a win. You might be rethinking what your objectives should be but being beside yourself seems excessive. The advisor very possibly put the assets where they should be based on what he heard from everyone. He could have done worse things by far.

You can regroup at this point in time, but the first step is to be clear about what you want.

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Re: I'm beside myself about my dad's investment account

Post by tibbitts » Sat Jul 06, 2019 11:19 am

theladybug123 wrote:
Fri Jul 05, 2019 8:59 pm
Five years ago my father (88 years old now), when he was of sound mind, worked with a lawyer to make an irrevocable trust so that down the road he could qualify for Veteran's Aide and Assistance benefits. My dad has been in assisted living for the past 10 years because he had a stroke with partial paralysis and my mom, whom he was married to for 50 years, had passed away. I have Power of Attorney and pretty much have taken him to all his doctors' appointments and deal with his finances. He has been on long term care insurance for the past five years, and we are hoping to qualify for Veteran's benefits since the LTC insurance is ending. Here's my problem.

Five years ago the lawyer gave him a name for a financial advisor who could help with investing money in irrevocable trusts. We moved everything to a managed account. It was great because I felt it was above board, and I didn't have to worry about anyone thinking I was misusing my dad's money. I met with the advisor last week. My dad's account has averaged 0.9% growth over the last five years when you take into account the fees that have been deducted. That is not even keeping up with inflation. The investments are conservative so he wouldn't lose his nest egg, but it is still so low. We are talking around $200,000. My dad now has dementia and I feel very responsible. He does okay with a small pension and social security, along with the long term care insurance which will end shortly. Between his income and Veteran's benefits, he won't really need to dip into the account at first, although care cost does continue to rise. He has lifetime supplemental insurance through his former work place, so his only costs are his assisted living facility.

Does anyone have any advice? I don't want to take risks with his money, but anything would probably be better than his managed account. I thought maybe even a CD or something. My own investments are in Vanguard, but I don't know if they do trusts and what I would even put it in.

Help! Any advice would be appreciated.
While you might not have done as well as possible, I don't think the returns are completely out of line. There are fees for managing money and probably for the trust. I'm not an expert on any limitations that might apply to investing these trust funds. I have some accounts with 5yr returns close to 1% that I manage myself.

It's good that you're so involved in your father's care, but I don't think a rate of return above 1% is going to have a huge impact in your situation.

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Re: I'm beside myself about my dad's investment account

Post by ResearchMed » Sat Jul 06, 2019 11:23 am

dbr wrote:
Sat Jul 06, 2019 11:13 am
To have arranged things to optimize benefits while also preserving the assets of a person of this age and situation is actually a win. You might be rethinking what your objectives should be but being beside yourself seems excessive. The advisor very possibly put the assets where they should be based on what he heard from everyone. He could have done worse things by far.

You can regroup at this point in time, but the first step is to be clear about what you want.
To OP:

Also, it's been a generally "up" market for the past several years.

As a thought experiment, how would you have felt if the Advisor had been heavy in equities (or even "stuff" like commodities or leveraged funds!?), and the market had taken a bit of a dive?

It's a bit easy to say, "Here we are; we could have done better", but that's IF WE HAD KNOWN what was to happen...

Do give yourself a break.
His money is still there, after all! :happy
It could have been soooo much worse...

RM
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Re: I'm beside myself about my dad's investment account

Post by fru-gal » Sat Jul 06, 2019 11:30 am

willthrill81 wrote:
Fri Jul 05, 2019 10:12 pm
I agree that CDs sound like a great choice at this point. 5 year CDs that pay 3.5% are available at this moment. A CD ladder might be the best option if you believe that he'll potentially need some of these funds soon.
Yes, don't buy brokered CDs, as they lag what you can buy from some credit unions and small banks (big banks are ripoffs in terms of CDs.) Take a look at depositaccounts.com

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Re: I'm beside myself about my dad's investment account

Post by illumination » Sat Jul 06, 2019 11:56 am

When financial planners get these irrevocable trusts, I really think they take advantage of the situation because they know it's usually not easy to just move accounts at the drop of a hat, at least with certain types of clients and trusts. I'm working through something similar with my Dad, he just had no idea what sort of crazy fees they were charging, all for the "privilege" of greatly underperforming the market. But in his case at least, certain amendments need to be made by an attorney to the trust before he can switch over.

.9% though for a rate of return after fees for the past 5 years is so just so mind blowing incompetent it should almost be criminal.

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Re: I'm beside myself about my dad's investment account

Post by bsteiner » Sat Jul 06, 2019 12:58 pm

mhalley wrote:
Fri Jul 05, 2019 9:23 pm
You might find this thread helpful. I think Vanguards has a 500k minimum for trusts.
viewtopic.php?t=208409
$500,000 is their minimum for serving as a trustee, nor for managing assets.

In this case, it's up to the trustee(s) to decide how to invest the assets, or whom if anyone to hire to manage the trust assets.

If the trustee(s) aren't happy with the person they selected to manage the trust assets, they can hire someone else (including Vanguard) to manage the trust assets, or they can invest the trust assets themselves.

Obviously they should invest the trust assets, or instruct whomever if anyone they hire to manage the trust assets, in a way that's appropriate given all of the relevant facts and circumstances.
illumination wrote:
Sat Jul 06, 2019 11:56 am
When financial planners get these irrevocable trusts, I really think they take advantage of the situation because they know it's usually not easy to just move accounts at the drop of a hat, at least with certain types of clients and trusts. I'm working through something similar with my Dad, he just had no idea what sort of crazy fees they were charging, all for the "privilege" of greatly underperforming the market. But in his case at least, certain amendments need to be made by an attorney to the trust before he can switch over.
...
The trustees can fire the planner at the drop of a hat, and either invest the assets themselves or hire someone else to manage the assets.

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sergeant
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Re: I'm beside myself about my dad's investment account

Post by sergeant » Sat Jul 06, 2019 1:06 pm

This scenario doesn't seem bad at all. We would all like to have had huge returns but your dad wanted absolute safety and received it.
Compared to many of the variable annuity posts here I think your dad did pretty well. Maybe you can do a bit better with CD's.
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Re: I'm beside myself about my dad's investment account

Post by CascadiaSoonish » Sat Jul 06, 2019 1:16 pm

I'm right there with you, theladybug123. I'm handling financial POA duties for a parent in a skilled nursing facility. About $200K in assets as well. I actually don't think this played out too badly given your father's needs and the amount of money available. Personally, I interpret my fiduciary responsibility to my parent as giving them peace of mind and optimizing the likelihood that funds will be available over the long term for whatever care is appropriate. That means I'm accepting lower returns -- with my parent's permission I just liquidated +/- $60K in appreciated stocks to park in a money market account even though there's not an immediate need for the money. So while I can't speak to the trust component of this, I don't think the low returns are necessarily a bad thing at all here.

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Re: I'm beside myself about my dad's investment account

Post by illumination » Sat Jul 06, 2019 2:27 pm

bsteiner wrote:
Sat Jul 06, 2019 12:58 pm
mhalley wrote:
Fri Jul 05, 2019 9:23 pm
You might find this thread helpful. I think Vanguards has a 500k minimum for trusts.
viewtopic.php?t=208409
$500,000 is their minimum for serving as a trustee, nor for managing assets.

In this case, it's up to the trustee(s) to decide how to invest the assets, or whom if anyone to hire to manage the trust assets.

If the trustee(s) aren't happy with the person they selected to manage the trust assets, they can hire someone else (including Vanguard) to manage the trust assets, or they can invest the trust assets themselves.

Obviously they should invest the trust assets, or instruct whomever if anyone they hire to manage the trust assets, in a way that's appropriate given all of the relevant facts and circumstances.
illumination wrote:
Sat Jul 06, 2019 11:56 am
When financial planners get these irrevocable trusts, I really think they take advantage of the situation because they know it's usually not easy to just move accounts at the drop of a hat, at least with certain types of clients and trusts. I'm working through something similar with my Dad, he just had no idea what sort of crazy fees they were charging, all for the "privilege" of greatly underperforming the market. But in his case at least, certain amendments need to be made by an attorney to the trust before he can switch over.
...
The trustees can fire the planner at the drop of a hat, and either invest the assets themselves or hire someone else to manage the assets.

That's not been my experience. For one, the trust service provider had to have their attorneys review how the trust was set up before they would even agree to move forward. If you say moved your brokerage account from Fidelity to Schwab, no one is going to have to check with their lawyer first.

With the trust I'm working with, changes to the actual trust document had to be made in order to switch, like changing the name of the fiduciary, which required an attorney. Also, technically the current fiduciary has to agree to allow the trust to be changed over and can contest it (but they won't). Also, the "other" trust provider has certain criteria and were under Nevada law, so more changes had to be made. For the trust I'm working with my father, it's going to cost over $5,000 in legal fees just to move the trust out of Northern Trust.

My point is, not every irrevocable trust can easily be changed over like say a standard brokerage account and tend to have more complications. I think some providers of these services take advantage of the situation.

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Re: I'm beside myself about my dad's investment account

Post by Thesaints » Sat Jul 06, 2019 2:34 pm

0.9%/yr +account management fees is not unreasonable, if it was invested in short term treasuries.
I wouldn't have a problem with that, as long as one is unable/unwilling to manage the thing himself (or had to go the irrevocable trust way) and absolute safety of capital had been their target.

You should be besides yourself only if the investment had been volatile, in which case such a return would amount to grand theft, or utter incompetence.

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Re: I'm beside myself about my dad's investment account

Post by NotWhoYouThink » Sat Jul 06, 2019 2:48 pm

If the money is in an irrevocable trust to allow him to receive benefits, then he is not the beneficiary and you will not be able to use the money for his care anyway, right? So he isn't the one affected by the low returns.

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Re: I'm beside myself about my dad's investment account

Post by bsteiner » Sat Jul 06, 2019 4:04 pm

illumination wrote:
Sat Jul 06, 2019 2:27 pm
bsteiner wrote:
Sat Jul 06, 2019 12:58 pm
...
The trustees can fire the planner at the drop of a hat, and either invest the assets themselves or hire someone else to manage the assets.
That's not been my experience. For one, the trust service provider had to have their attorneys review how the trust was set up before they would even agree to move forward. If you say moved your brokerage account from Fidelity to Schwab, no one is going to have to check with their lawyer first.

With the trust I'm working with, changes to the actual trust document had to be made in order to switch, like changing the name of the fiduciary, which required an attorney. Also, technically the current fiduciary has to agree to allow the trust to be changed over and can contest it (but they won't). Also, the "other" trust provider has certain criteria and were under Nevada law, so more changes had to be made. For the trust I'm working with my father, it's going to cost over $5,000 in legal fees just to move the trust out of Northern Trust.

My point is, not every irrevocable trust can easily be changed over like say a standard brokerage account and tend to have more complications. I think some providers of these services take advantage of the situation.
I agree that there's some effort involved in changing the trustee (though presumably he retained or gave a close family member the power to remove and replace the trustees, provided the replacement trustee is not a close relative or subordinate employee).

However, it takes no more effort for a trustee to move an account from Fidelity to Schwab than for an individual to move an account from Fidelity to Schwab.

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Re: I'm beside myself about my dad's investment account

Post by LilyFleur » Sat Jul 06, 2019 8:43 pm

Are you the trustee? Has your father been declared incapacitated according to the terms of the trust (due to the dementia), and a trustee appointed to handle his investments?

softwaregeek
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Re: I'm beside myself about my dad's investment account

Post by softwaregeek » Sat Jul 06, 2019 10:28 pm

I don’t see the problem. He is almost 90. He should be in safe securities. He is. Yes, the fee is a little high but 200 is a small account and there are fixed compliance and insurance costs for the trustee.

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