Estate Planning, Trust, and Fiduciary Advisor

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Topic Author
Gentex
Posts: 78
Joined: Mon Feb 26, 2007 3:23 pm
Location: Southern California

Estate Planning, Trust, and Fiduciary Advisor

Post by Gentex »

Working through the process of estate planning and thinking about how to assist successor trustee in the event of untimely death.

Background:
Me: 50yo male in good health
Wife: 49yo female in good health
kids: 15yo and 12yo
approximate NW: $4million

Have established a trust and transferred home, banking accounts, and primary brokerage to the trust.
Have established trust as beneficiary of life insurance and retirement accounts.
Considering naming trust as successor owner of 529 college savings plans (I am currently named owner)

From an estate transfer perspective, I feel pretty good about our position. In the event of our deaths, while our children are still minors, money will flow from retirement accounts and insurance policies into trust accounts. The vast majority of our assets (effectively 100%) will reside in the trust, all for the benefit of supporting our children into adulthood.

The key issue:
How to prepare our successor trustee to deal with the potential complexity of assets in the trust, particularly the tax issues around trust income, distributions from retirement accounts, and use of the 529 plans?

I'm inclined to encourage the successor trustee to find professional help regarding the distributions and tax consequences. Our successor trustee is a wonderful person, who we trust 100% to act in the best interest of our kids. But, they are not a CPA or financial professional and I worry that the financial issues around managing a trust that may have upwards of $5 million in assets would be stressful and difficult.

Ideally I would like to find an advisor who could take on the tax planning, trust distributions, and possibly modest investment advice.

Has anyone gone through this process and found a satisfactory solution? Should I start my search with CPA/tax people or the broader category of wealth managers? Are low cost, fiduciary, fee-only advisors a thing for this kind of service?

TIA for any thoughts or suggestions
Gill
Posts: 7462
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gill »

From your description, I feel you have probably chosen the wrong trustee. Does your trustee have the experience, financial responsibility, knowledge of managing trusts, independent judgment and perpetual existence that you would have with a corporate trustee? Your trust and the needs of your children clearly call for the use of a corporate trustee in the form of a bank or trust company. These institutions have all the capabilities you describe under one roof.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
User avatar
Topic Author
Gentex
Posts: 78
Joined: Mon Feb 26, 2007 3:23 pm
Location: Southern California

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gentex »

From your description, I feel you have probably chosen the wrong trustee. Does your trustee have the experience, financial responsibility, knowledge of managing trusts, independent judgment and perpetual existence that you would have with a corporate trustee? Your trust and the needs of your children clearly call for the use of a corporate trustee in the form of a bank or trust company. These institutions have all the capabilities you describe under one roof.
Gill


Thanks Gill. Possibly true that this person is the wrong trustee. For various reasons, it seemed appropriate to have the guardian, our representative, and the successor trustee be the same person. Also, I am instinctively negative to the idea of a faceless banker having full control over the financial resources. Our middle ground was the direction for the successor trustee to find 3rd party assistance.

Food for thought though. Thank you.
Lee_WSP
Posts: 5348
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Lee_WSP »

deleted.
Last edited by Lee_WSP on Fri Jun 11, 2021 7:35 pm, edited 1 time in total.
User avatar
asset_chaos
Posts: 2025
Joined: Tue Feb 27, 2007 6:13 pm
Location: Melbourne

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by asset_chaos »

Perhaps consider a co-trustee arrangement, one trustee the trusted person, one trustee a professional trust department. Our plan has the equivalent of your trusted person make decisions about disbursements to the beneficiaries, while the professional is tasked to handle tax and investing issues. From a planning point of view this arrangement also means that if the trusted person at any point in the future becomes unable or unwilling to carry on with the responsibility, the professional corporate trustee is already in place to assume all responsibilities. Your trust will need flexibility because future circumstances can change, and you'll need some language in the trust anyway about what to do if the personal trustee can't continue.
Regards, | | Guy
Gill
Posts: 7462
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gill »

Gentex wrote: Fri Jun 11, 2021 4:01 pm From your description, I feel you have probably chosen the wrong trustee. Does your trustee have the experience, financial responsibility, knowledge of managing trusts, independent judgment and perpetual existence that you would have with a corporate trustee? Your trust and the needs of your children clearly call for the use of a corporate trustee in the form of a bank or trust company. These institutions have all the capabilities you describe under one roof.
Gill


Thanks Gill. Possibly true that this person is the wrong trustee. For various reasons, it seemed appropriate to have the guardian, our representative, and the successor trustee be the same person. Also, I am instinctively negative to the idea of a faceless banker having full control over the financial resources. Our middle ground was the direction for the successor trustee to find 3rd party assistance.

Food for thought though. Thank you.
It’s not a “faceless banker” but the entire organization you’re hiring including trust administrators, often with legal backgrounds, investment professionals, tax people, accounting people for trust records and statements and a discretionary payments committee to preform that function, all for one fee. No individual can offer these benefits. As suggested above, you might consider having your selection serve as a co-trustee. I may be a bit biased but I feel you’d be making a mistake not to include a corporate trustee.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Ranunculus
Posts: 145
Joined: Wed Aug 28, 2019 1:32 pm

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Ranunculus »

It’s definitely worth setting up a consultation with your estate attorney to discuss the details. I agree with the recommendation to have the guardian as co-trustee with a corporate trustee. A corporate trustee provides a certain economy of scale in trust management. Your guardian could end up spending a fortune in attorney fees while seeking guidance, and they may fall prey to the many high fee “wealth management” firms that promise to hold your hand and solve all of your problems for you.

I called several corporate trustees before choosing one and most of them had easily reachable fiduciaries willing to answer all questions.
User avatar
WoodSpinner
Posts: 2109
Joined: Mon Feb 27, 2017 1:15 pm

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by WoodSpinner »

OP,

What is your goal for having the Trust as Primary beneficiary of your IRA?

Wouldn’t it be better to have your spouse as primary and trust as secondary (for each of you)?

Or am I misunderstanding your post?

WoodSpinner
JoinToday
Posts: 986
Joined: Sat Mar 10, 2007 9:59 pm

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by JoinToday »

This is something I struggle with.

My lawyer who generated my trust doc didn't bat an eyelash over 1% AUM trust fees. I can't stomach 1% AUM for a few hours of real work per year (ignoring the time it takes for them to print out glossy colorful chart showing how good they did in the previous quarter or year). In your case $40K - $50K per year on a $4M - $5M trust. I am expecting my child (now fully launched) to be co trustee with another relative to manage the trust. But expect my child to do all the real work, with the relative as a rubber stamp to OK all transaction. But this option is 10 - 15 years away in your case.

But $40K - $50K is cheaper than having a trustee completely mismanage the trust, or "dip" into the trust for personal expenses. I really struggle with the best solution in my case.
I wish I had learned about index funds 25 years ago
Luckywon
Posts: 1465
Joined: Tue Mar 28, 2017 10:33 am

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Luckywon »

Gentex wrote: Fri Jun 11, 2021 12:04 pm Have established trust as beneficiary of life insurance and retirement accounts.
If you have named a trust as beneficiary of your retirement accounts the successor trustee will need to retain on an ongoing basis a trust and estates attorney competent in handling this. Neither our first or second attorneys were. I hope your trust was set up correctly to handle retirement benefits optimally and are also QTIP qualifed.

Anyway given this we have not named a corporate successor trustee, though one could be appointed by our trust protectors. I think the important thing is that your successor trustees or trust protectors know expert advice Is needed on an ongoing basis especially if your retirement accounts end up in a trust.
FoolStreet
Posts: 1307
Joined: Fri Sep 07, 2012 12:18 am

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by FoolStreet »

Ranunculus wrote: Sat Jun 12, 2021 4:08 pm It’s definitely worth setting up a consultation with your estate attorney to discuss the details. I agree with the recommendation to have the guardian as co-trustee with a corporate trustee. A corporate trustee provides a certain economy of scale in trust management. Your guardian could end up spending a fortune in attorney fees while seeking guidance, and they may fall prey to the many high fee “wealth management” firms that promise to hold your hand and solve all of your problems for you.

I called several corporate trustees before choosing one and most of them had easily reachable fiduciaries willing to answer all questions.
Ranunculus, would you mind sharing what firms you evaluated, how much they charge and whether they invest in a simple 3-fund style portfolio and if/how they handle real estate?
User avatar
Topic Author
Gentex
Posts: 78
Joined: Mon Feb 26, 2007 3:23 pm
Location: Southern California

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gentex »

WoodSpinner wrote: Sat Jun 12, 2021 4:50 pm OP,

What is your goal for having the Trust as Primary beneficiary of your IRA?

Wouldn’t it be better to have your spouse as primary and trust as secondary (for each of you)?

Or am I misunderstanding your post?

WoodSpinner
Quite right. I was unclear there. Wife is primary and Trust is secondary.
FoolStreet
Posts: 1307
Joined: Fri Sep 07, 2012 12:18 am

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by FoolStreet »

JoinToday wrote: Sat Jun 12, 2021 5:40 pm This is something I struggle with.

My lawyer who generated my trust doc didn't bat an eyelash over 1% AUM trust fees. I can't stomach 1% AUM for a few hours of real work per year (ignoring the time it takes for them to print out glossy colorful chart showing how good they did in the previous quarter or year). In your case $40K - $50K per year on a $4M - $5M trust. I am expecting my child (now fully launched) to be co trustee with another relative to manage the trust. But expect my child to do all the real work, with the relative as a rubber stamp to OK all transaction. But this option is 10 - 15 years away in your case.

But $40K - $50K is cheaper than having a trustee completely mismanage the trust, or "dip" into the trust for personal expenses. I really struggle with the best solution in my case.
For cost conscious planners, seems like Vanguard Trust (VNTC) is the most popular choice.

The other option is to choose a co-trustee fiduciary (at cost) [or family trusted singular trustee] who uses a wealth manager who invest in low cost index funds (at cost).

You could tell your fiduciary to invest in Vanguard PAS. But where do you find a low(er) cost co-trustee fiduciary? Inversely, you could find a corporate co-trustee like Schwab or Fidelity, then find an investment manager who will invest on their respective platforms using low cost index funds (3-fund).

Ultimately, most people seem to just pay the 1%, but I'm always looking to hear about more bogle head minded service providers.
User avatar
Topic Author
Gentex
Posts: 78
Joined: Mon Feb 26, 2007 3:23 pm
Location: Southern California

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gentex »

Luckywon wrote: Sat Jun 12, 2021 5:52 pm
Gentex wrote: Fri Jun 11, 2021 12:04 pm Have established trust as beneficiary of life insurance and retirement accounts.
If you have named a trust as beneficiary of your retirement accounts the successor trustee will need to retain on an ongoing basis a trust and estates attorney competent in handling this. Neither our first or second attorneys were. I hope your trust was set up correctly to handle retirement benefits optimally and are also QTIP qualifed.

Anyway given this we have not named a corporate successor trustee, though one could be appointed by our trust protectors. I think the important thing is that your successor trustees or trust protectors know expert advice Is needed on an ongoing basis especially if your retirement accounts end up in a trust.
I was unclear in my description of the beneficiaries. Wife is primary beneficiary for all accounts and currently co-trustee. The scenario in my mind is in the event my wife and I die and the successor trustee comes into play to care for our under-age children.

At the very least, the successor trustee will know that professional advice is warranted. But, based on this discussion, we may consider adding a corporate trustee as well. The idea of co-successor trustees does have some appeal for the reasons expressed in this thread.
User avatar
Topic Author
Gentex
Posts: 78
Joined: Mon Feb 26, 2007 3:23 pm
Location: Southern California

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gentex »

JoinToday wrote: Sat Jun 12, 2021 5:40 pm My lawyer who generated my trust doc didn't bat an eyelash over 1% AUM trust fees. I can't stomach 1% AUM for a few hours of real work per year (ignoring the time it takes for them to print out glossy colorful chart showing how good they did in the previous quarter or year). In your case $40K - $50K per year on a $4M - $5M trust. I am expecting my child (now fully launched) to be co trustee with another relative to manage the trust. But expect my child to do all the real work, with the relative as a rubber stamp to OK all transaction. But this option is 10 - 15 years away in your case.

But $40K - $50K is cheaper than having a trustee completely mismanage the trust, or "dip" into the trust for personal expenses. I really struggle with the best solution in my case.
Generally, I feel the same way about percent of AUM charges. I don't think meaningful investment activity will be needed, but the tax considerations have several moving parts and could result in costly errors. Will be having a conversation with the successor trustee in a couple weeks to talk about what this might look like -- remembering that hopefully this is all theoretical <fingers crossed> until the kids are of age to directly handle the distributions on their own.
afan
Posts: 6020
Joined: Sun Jul 25, 2010 4:01 pm

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by afan »

There are corporate entities that will serve as administrative trustee but let someone else manage the investments. If your beneficiary is responsible enough to manage a handful of index funds, then a directed trustee could ensure that the paperwork is done correctly. Apparently they will do this for flat fees in the mid single digits of thousands.

I don't know why you would need regular involvement of an estates and trusts attorney once the trust is set up. You might want an accountant or enrolled agent to do the tax return, although I do no think they are all that difficult if the investments are all in mutual funds or ETFs.
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
Ranunculus
Posts: 145
Joined: Wed Aug 28, 2019 1:32 pm

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Ranunculus »

FoolStreet wrote: Sat Jun 12, 2021 9:22 pm
Ranunculus wrote: Sat Jun 12, 2021 4:08 pm It’s definitely worth setting up a consultation with your estate attorney to discuss the details. I agree with the recommendation to have the guardian as co-trustee with a corporate trustee. A corporate trustee provides a certain economy of scale in trust management. Your guardian could end up spending a fortune in attorney fees while seeking guidance, and they may fall prey to the many high fee “wealth management” firms that promise to hold your hand and solve all of your problems for you.

I called several corporate trustees before choosing one and most of them had easily reachable fiduciaries willing to answer all questions.
Ranunculus, would you mind sharing what firms you evaluated, how much they charge and whether they invest in a simple 3-fund style portfolio and if/how they handle real estate?
The trust departments of the brokerages I contacted several years ago, Schwab and Fidelity, did not offer real estate management. Listed below are the fees for Members Trust Company and a regional bank & trust in a high cost of living city in coastal California. Both will manage rental property or arrange the sale of property depending on where our beneficiary wants to live. We included a sentence in the trust that low fee index funds are preferred, but since we can’t predict the future we did not make it a requirement. It seems imprudent to assume that the best investment strategy today will always be the best strategy.

Our trust has spendthrift provisions to ensure that our beneficiary has lifetime support and is protected from creditors/spouses etc. The work involved in administering such a trust is worth the fee to us and we view it as we would an insurance premium, somewhat painful but the peace of mind is priceless.

Here is the fee structure for Members Trust Company, owned by US credit unions:

First $500,000 of trust assets1.25%
Next $1,500,000 1.00%
Next $1,000.000 0.80%
Next $1,000,000 0.75%
Over $4,000,000 0.70%
Minimum annual fee of $1,875 applies

Here is the fee schedule for a full service Bank & Trust in California:

First $2MM 1.30%
Next $3MM 1.00%
Next $5MM 0.75%
Over $10MM 0.65%

Minimum Account Balance$1MM
Minimum Annual Fee $13,000
Lee_WSP
Posts: 5348
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Lee_WSP »

JoinToday wrote: Sat Jun 12, 2021 5:40 pm I can't stomach 1% AUM for a few hours of real work per year (ignoring the time it takes for them to print out glossy colorful chart showing how good they did in the previous quarter or year).
You're looking at it the wrong way. You are paying 1% AUM to ensure that your beneficiary is not going to be fleeced, will not lose the principal while it is under management, is protected even if they do something so ill advised that they go bankrupt, etc etc. All for a measly 1% AUM and only while your beneficiary is under a deficiency of financial capacity. Once they reach whatever milestone you wish, the trust should direct the corporate trustee to resign and hand over the trusteeship to the beneficiary. Or it could continue forever if you/they wish.
FoolStreet
Posts: 1307
Joined: Fri Sep 07, 2012 12:18 am

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by FoolStreet »

Ranunculus wrote: Sun Jun 13, 2021 8:37 am
FoolStreet wrote: Sat Jun 12, 2021 9:22 pm
Ranunculus wrote: Sat Jun 12, 2021 4:08 pm It’s definitely worth setting up a consultation with your estate attorney to discuss the details. I agree with the recommendation to have the guardian as co-trustee with a corporate trustee. A corporate trustee provides a certain economy of scale in trust management. Your guardian could end up spending a fortune in attorney fees while seeking guidance, and they may fall prey to the many high fee “wealth management” firms that promise to hold your hand and solve all of your problems for you.

I called several corporate trustees before choosing one and most of them had easily reachable fiduciaries willing to answer all questions.
Ranunculus, would you mind sharing what firms you evaluated, how much they charge and whether they invest in a simple 3-fund style portfolio and if/how they handle real estate?
The trust departments of the brokerages I contacted several years ago, Schwab and Fidelity, did not offer real estate management. Listed below are the fees for Members Trust Company and a regional bank & trust in a high cost of living city in coastal California. Both will manage rental property or arrange the sale of property depending on where our beneficiary wants to live. We included a sentence in the trust that low fee index funds are preferred, but since we can’t predict the future we did not make it a requirement. It seems imprudent to assume that the best investment strategy today will always be the best strategy.

Our trust has spendthrift provisions to ensure that our beneficiary has lifetime support and is protected from creditors/spouses etc. The work involved in administering such a trust is worth the fee to us and we view it as we would an insurance premium, somewhat painful but the peace of mind is priceless.

Here is the fee structure for Members Trust Company, owned by US credit unions:

First $500,000 of trust assets1.25%
Next $1,500,000 1.00%
Next $1,000.000 0.80%
Next $1,000,000 0.75%
Over $4,000,000 0.70%
Minimum annual fee of $1,875 applies

Here is the fee schedule for a full service Bank & Trust in California:

First $2MM 1.30%
Next $3MM 1.00%
Next $5MM 0.75%
Over $10MM 0.65%

Minimum Account Balance$1MM
Minimum Annual Fee $13,000
Thank you for sharing the detailed post. It is hard to get good real life experiences outside of bogleheads. I appreciate that Members Trust doesn’t own proprietary funds and they seem to use a clear stock:bond asset allocation. Did you get the feeling they would give more than lip service to your index fund request? Also. What brokerage platform do they use. Their own or Schwab/Fidelity?
Ranunculus
Posts: 145
Joined: Wed Aug 28, 2019 1:32 pm

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Ranunculus »

FoolStreet wrote: Mon Jun 14, 2021 10:24 am
Ranunculus wrote: Sun Jun 13, 2021 8:37 am
FoolStreet wrote: Sat Jun 12, 2021 9:22 pm
Ranunculus wrote: Sat Jun 12, 2021 4:08 pm It’s definitely worth setting up a consultation with your estate attorney to discuss the details. I agree with the recommendation to have the guardian as co-trustee with a corporate trustee. A corporate trustee provides a certain economy of scale in trust management. Your guardian could end up spending a fortune in attorney fees while seeking guidance, and they may fall prey to the many high fee “wealth management” firms that promise to hold your hand and solve all of your problems for you.

I called several corporate trustees before choosing one and most of them had easily reachable fiduciaries willing to answer all questions.
Ranunculus, would you mind sharing what firms you evaluated, how much they charge and whether they invest in a simple 3-fund style portfolio and if/how they handle real estate?
The trust departments of the brokerages I contacted several years ago, Schwab and Fidelity, did not offer real estate management. Listed below are the fees for Members Trust Company and a regional bank & trust in a high cost of living city in coastal California. Both will manage rental property or arrange the sale of property depending on where our beneficiary wants to live. We included a sentence in the trust that low fee index funds are preferred, but since we can’t predict the future we did not make it a requirement. It seems imprudent to assume that the best investment strategy today will always be the best strategy.

Our trust has spendthrift provisions to ensure that our beneficiary has lifetime support and is protected from creditors/spouses etc. The work involved in administering such a trust is worth the fee to us and we view it as we would an insurance premium, somewhat painful but the peace of mind is priceless.

Here is the fee structure for Members Trust Company, owned by US credit unions:

First $500,000 of trust assets1.25%
Next $1,500,000 1.00%
Next $1,000.000 0.80%
Next $1,000,000 0.75%
Over $4,000,000 0.70%
Minimum annual fee of $1,875 applies

Here is the fee schedule for a full service Bank & Trust in California:

First $2MM 1.30%
Next $3MM 1.00%
Next $5MM 0.75%
Over $10MM 0.65%

Minimum Account Balance$1MM
Minimum Annual Fee $13,000
Thank you for sharing the detailed post. It is hard to get good real life experiences outside of bogleheads. I appreciate that Members Trust doesn’t own proprietary funds and they seem to use a clear stock:bond asset allocation. Did you get the feeling they would give more than lip service to your index fund request? Also. What brokerage platform do they use. Their own or Schwab/Fidelity?
I actually don't know the answers to those questions and didn't think to ask. When I called their 800 number I reached a senior trust officer and asked mostly about fiduciary services for our beneficiary, as well as the handling of inherited retirement accounts. They offer accounts called "Flex IRAs" that are essentially separate instruments for handling inheritance of retirement accounts. These seem like an expensive gimmick, the fees seem high, especially while the IRA account holder is living, and the minimum balance is $250,000 for an "inheritance protection trust". If the balance falls below $250K the account becomes unrestricted, which seems to defeat the purpose of a trust. We decided against the Flex IRAs and will use our own trust document for all assets.

Here is the link to the FlexIRA options: https://memberstrust.com/flexira/flexira-faqs/

They neglect to list the fees in the FAQ section, here is the information from a PDF I was sent:

1% During Life , Upon Death 1.25% Account Balance $500,000

0.75% During Life , Upon Death 1.00% Account Balance $1,500,000

The day after I spoke to the trust officer I received emails from one of the fiduciaries and the regional credit union representative, and both of those people responded promptly to further inquiries.
FoolStreet
Posts: 1307
Joined: Fri Sep 07, 2012 12:18 am

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by FoolStreet »

Ranunculus wrote: Mon Jun 14, 2021 2:36 pm
FoolStreet wrote: Mon Jun 14, 2021 10:24 am
Ranunculus wrote: Sun Jun 13, 2021 8:37 am
FoolStreet wrote: Sat Jun 12, 2021 9:22 pm
Ranunculus wrote: Sat Jun 12, 2021 4:08 pm It’s definitely worth setting up a consultation with your estate attorney to discuss the details. I agree with the recommendation to have the guardian as co-trustee with a corporate trustee. A corporate trustee provides a certain economy of scale in trust management. Your guardian could end up spending a fortune in attorney fees while seeking guidance, and they may fall prey to the many high fee “wealth management” firms that promise to hold your hand and solve all of your problems for you.

I called several corporate trustees before choosing one and most of them had easily reachable fiduciaries willing to answer all questions.
Ranunculus, would you mind sharing what firms you evaluated, how much they charge and whether they invest in a simple 3-fund style portfolio and if/how they handle real estate?
The trust departments of the brokerages I contacted several years ago, Schwab and Fidelity, did not offer real estate management. Listed below are the fees for Members Trust Company and a regional bank & trust in a high cost of living city in coastal California. Both will manage rental property or arrange the sale of property depending on where our beneficiary wants to live. We included a sentence in the trust that low fee index funds are preferred, but since we can’t predict the future we did not make it a requirement. It seems imprudent to assume that the best investment strategy today will always be the best strategy.

Our trust has spendthrift provisions to ensure that our beneficiary has lifetime support and is protected from creditors/spouses etc. The work involved in administering such a trust is worth the fee to us and we view it as we would an insurance premium, somewhat painful but the peace of mind is priceless.

Here is the fee structure for Members Trust Company, owned by US credit unions:

First $500,000 of trust assets1.25%
Next $1,500,000 1.00%
Next $1,000.000 0.80%
Next $1,000,000 0.75%
Over $4,000,000 0.70%
Minimum annual fee of $1,875 applies

Here is the fee schedule for a full service Bank & Trust in California:

First $2MM 1.30%
Next $3MM 1.00%
Next $5MM 0.75%
Over $10MM 0.65%

Minimum Account Balance$1MM
Minimum Annual Fee $13,000
Thank you for sharing the detailed post. It is hard to get good real life experiences outside of bogleheads. I appreciate that Members Trust doesn’t own proprietary funds and they seem to use a clear stock:bond asset allocation. Did you get the feeling they would give more than lip service to your index fund request? Also. What brokerage platform do they use. Their own or Schwab/Fidelity?
I actually don't know the answers to those questions and didn't think to ask. When I called their 800 number I reached a senior trust officer and asked mostly about fiduciary services for our beneficiary, as well as the handling of inherited retirement accounts. They offer accounts called "Flex IRAs" that are essentially separate instruments for handling inheritance of retirement accounts. These seem like an expensive gimmick, the fees seem high, especially while the IRA account holder is living, and the minimum balance is $250,000 for an "inheritance protection trust". If the balance falls below $250K the account becomes unrestricted, which seems to defeat the purpose of a trust. We decided against the Flex IRAs and will use our own trust document for all assets.

Here is the link to the FlexIRA options: https://memberstrust.com/flexira/flexira-faqs/

They neglect to list the fees in the FAQ section, here is the information from a PDF I was sent:

1% During Life , Upon Death 1.25% Account Balance $500,000

0.75% During Life , Upon Death 1.00% Account Balance $1,500,000

The day after I spoke to the trust officer I received emails from one of the fiduciaries and the regional credit union representative, and both of those people responded promptly to further inquiries.
I wanted to loop back and thank you for the continued dialogue on Members Trust. I did a little more web searching and found a URL for their prospectuses, page for model portfolio (at the AA level), and a flyer which included a conservative model portfolio that had the double-click to the ETF subtype. Based on this, it appears that they do use ETFs primarily, about half of which are index funds. They slice and dice more than a Boglehead would think is necessary but they are going in the right direction for a Trust company. The ETFs of funds (Dodge & Cox or Franklin for US stock, seems a waste if they have Vanguard and iShares index funds to create a TSM exposure.) The flex IRA concept is a really nice way to address the secure act in a turnkey approach. FlexIRA fees seem high to a Boglehead, but perhaps the extra fee is a function of the ruleset over 10 years. I agree with your point about using your own trust documents since you have them.

https://memberstrust.com/prospectuses/
https://mtcwealthmanagement.com/etf-por ... ortfolios/
https://static1.squarespace.com/static/ ... LV+1mb.pdf

Overall, based on their fee structure and use of non-index ETFs, I don't think they are a "deal" but they are getting there and you could do worse. If there is a good relationship / connection, then they seem good. I will put them on my list to call and learn a little more. I am keeping a list of pre-vetted trust firms so that my heirs can refer to a short-list if they need.
User avatar
Topic Author
Gentex
Posts: 78
Joined: Mon Feb 26, 2007 3:23 pm
Location: Southern California

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by Gentex »

This will probably be my last response to this thread. It's been very helpful for me to think through a few things that I should have considered earlier.

Also, since this is the Bogleheads, I recently found that Vanguard actually offers trust services that cover much of what I was thinking about when starting this discussion. Basic information can be found here: https://investor.vanguard.com/advice/trust-services

My primary bank also offers such services through their wealth management arm, so it looks like we have several options to choose from. Will be working with my wife and our successor trustee to pin down the details for the plan.

Thanks to everyone for their input and comments.

Gentex
User avatar
celia
Posts: 12991
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Estate Planning, Trust, and Fiduciary Advisor

Post by celia »

Gentex wrote: Fri Jun 11, 2021 12:04 pm Our successor trustee is a wonderful person, who we trust 100% to act in the best interest of our kids. But, they are not a CPA or financial professional and I worry that the financial issues around managing a trust that may have upwards of $5 million in assets would be stressful and difficult.
When we created our trust and the kids were minors, we were advised to choose a trustee separate than the children’s guardian, especially if the guardian(s) had minor children of their own. Taking care of kids can be a full-time job in itself.
Post Reply