Need A Trust Company

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Topic Author
EMDW
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Need A Trust Company

Post by EMDW » Sat Mar 26, 2016 10:39 am

Hello,
Previous post: "We need a trust company for a family revocable trust. We will be the trustee and manager of the trust until our demise. We are considering Vanguard as the custodian for the trust (taxable accounts already with Vanguard and 401k are Vanguard funds; spouse uses other companies for retirement etc). Upon our demise, we would need Vanguard to take over as trustee (eg. Vanguard trust management services). Our CPA company has agreed to sell our primary resident and put the proceeds into the trust upon our demise; Vanguard will not accept responsibility for this. Our attorney has recommended a local investment trust company. Any sights on Vanguard and if our plan sounds reasonable? Thank you."

Update: Vanguard updated fees for a successor trust: 0.3% AUM for the first 1-5 million, trust administration fee: 0.25% or minimum of $3500 a year. Local trust company fee is 1% for AUM and trust administration.
Attorney's recommendation: use local trust company as they will hire a real estate agent to sell the home and proceeds will go to the trust. Also, wants me to manage the assets (stocks, bonds, cash, home) if spouse dies before me and wants the trust company to take over trust administration if I die before spouse because he wants to make sure my extended family receives their share as I've contributed the most to the assets (spouse is surprise about the trust taking over when I die); Spouse will keep the house. Our agreement is that a larger percentage(70%) is to go to my side of the family and a smaller percentage to his side (30%). We have no children. Any suggestions?
Last edited by EMDW on Fri Nov 04, 2016 4:38 am, edited 1 time in total.

Biffer
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Re: Need A Trust Company

Post by Biffer » Tue Mar 29, 2016 6:41 pm

I don't have any personal experience using Vanguard's trustee services, but there are some previous threads on similar topics. You may find some useful information in the thread below, especially beginning when afan revived the thread in August 2015:
viewtopic.php?p=2591155&sid=2b4509fce66 ... 9#p2591155
sari wrote:...Our CPA company has agreed to sell our primary resident and put the proceeds into the trust upon our demise...
I like the idea of the house being sold after your demise, but in what capacity would your CPA be acting to do so?

Topic Author
EMDW
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Re: Need A Trust Company

Post by EMDW » Tue Apr 05, 2016 10:31 pm

Hello,
Thanks for the reply. I guess a neutral person/cpa firm may hire a realtor to sell the home and place the funds in the trust? I'm not sure how much to pay the potential cpa firm for the sale. Is this even feasible. Should I just have a family member sell the home instead? If you have other suggestions on how this could work I would appreciate it.

NMJack
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Re: Need A Trust Company

Post by NMJack » Wed Apr 06, 2016 2:13 pm

Could you retitle your house to your living trust and have your will appoint a special trustee (per terms in the trust) to conduct the sale and deliver the proceeds to the trust? I believe that a special trustee can be utilized for specific property dispositions, although others are certainly much more knowledgeable than me.

c1over8
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Re: Need A Trust Company

Post by c1over8 » Wed Apr 06, 2016 7:13 pm

You would have to somehow grant the CPA the power to sell your house. For example if they were the executor under your will and your will grants the power to sell real estate. This would mean your real estate is going through probate though. If they were a trustee under your trust that grants the power to sell the real estate and you either retitle the real estate to the trust or file a deed to put a TOD designation to the trust. Your attorney should know how to structure this.

I don't have any personal knowledge of Vanguard but like Biffer said there are some other posts on the topic.

Good luck!

Topic Author
EMDW
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Re: Need A Trust Company

Post by EMDW » Sat Apr 16, 2016 9:46 am

Which one of these 2 companies seems more reasonable (fees) as a successor trustee for investment/retirement/a home?

1. Local trust company: first $1M: 1% fee; $1-2 M: 0.8%, $2-5 M: 0.6%, over $5 M: negotiable. Minimum fee: $3,000.00. Will hire a realtor to sell home. Will pick their own funds but can specify if you want funds with the lowest expense ratio.

2. Vanguard Trust Company: will have nothing to do with your home. I like the funds especially the balanced fund (60/40) or if that changes in the future then the total stock index and total bond index without international will be acceptable. I wonder if they will allow me to specify this in the documents. See pages 6 & 7 for fees: https://personal.vanguard.com/pdf/eptsb.pdf

Thank you.

NMJack
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Re: Need A Trust Company

Post by NMJack » Sat Apr 16, 2016 6:40 pm

You may wish to review the Fidelity info posted here:

https://fiws.fidelity.com/app/literatur ... onType=pdf

It looks like Vanguard requires investment management @ ~0.70% prior to buying their trustee service. I've been told by my Fidelity rep that you can hire Fidelity as trustee but not pay the (ridiculous) fees for "professional financial management." My trust mandates passive, index based investing, so there would be little need, or opportunity, for a trustee to hire additional help. I find the Fidelity "Agent for Trustee" service starting at .12% to be an interesting option as a co-trustee for my spouse or adult child. Not necessarily cheap, but definitely cheaper than full blown 1%+ corporate trustee (and also less risk).

afan
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Re: Need A Trust Company

Post by afan » Sun Apr 17, 2016 10:45 am

Vanguard does not require investment management at 0.7% prior to serving as trustee. Vanguard does offer investment management without being trustee. This is their Personal Advisor Service at 0.35%. If Vanguard serves as trustee then investment management is included in the fee. The trustee fee is not a flat 0.7%. It is on a sliding scale so that the percent is smaller on larger trusts. If the trust I hanlde were larger then Vanguard might be a good deal.

The posted information from Fidelity is new since I searched for trustees. I don't understand the various levels of service. The 0.12% fee is getting down to levels I could justify paying, but it is not at all clear to me what is included. The brochure was too vague for me. If they did the accounting and discretionary distributions and let me handle the investment management that would be great. If they did the accounting only I am not sure that beats the statements from the trust brokerage account, provided for free. Does anyone understand the difference between "agent for" and "administrative"?

In my case the lawyers said I was not required to have a corporate trustee and if any of the hypotheticals were to come up I could hire one then. For now I am doing it myself and no problems.

It is disappointing that even Vanguard charges so much for the investment management, given how little work is involved. I would rather spend that money on the beneficiary than buying services the trust does not need.

The change in the Fidelity design suggests that this business is still in flux among the nontraditional trustees. If you are looking I suggest getting up to date fees and services.
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

NMJack
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Re: Need A Trust Company

Post by NMJack » Sun Apr 17, 2016 2:47 pm

afan wrote:Vanguard does not require investment management at 0.7% prior to serving as trustee.
I hope you are right about that. I went back and reviewed the Vanguard brochure linked several posts back. It strongly suggests that you receive, and pay for, "investment management" if you hire them as sole trustee or co-trustee. The examples on page 9 all show both together. Page 5 shows investment management as a "service you receive" under the sole or co-trustee scenario. It would be great if VG would perform all the duties of an independent trustee for $2500 per year, but I fear that is too good to be true. To your point, I think this is all evolving, and as Fidelity, Vanguard and other low cost brokerages expand into this area, some of the traditional "just hand us the keys and 1.5% AUM" trust companies are going to have to change.

Ben10
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Re: Need A Trust Company

Post by Ben10 » Sun Apr 17, 2016 3:00 pm

It is not uncommon for a corporate trustee to decline to act with respect to assets other than cash/securities - e.g., real estate or business. One other poster was correct in that you can appoint your CPA or someone else as "special trustee" to sell the real property. The sale proceeds will be paid to the trust and then managed by corporate trustee with the other trust assets.

NMJack
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Re: Need A Trust Company

Post by NMJack » Sun Apr 17, 2016 3:02 pm

afan wrote:Does anyone understand the difference between "agent for" and "administrative"?

In my case the lawyers said I was not required to have a corporate trustee and if any of the hypotheticals were to come up I could hire one then. For now I am doing it myself and no problems.

It is disappointing that even Vanguard charges so much for the investment management, given how little work is involved. I would rather spend that money on the beneficiary than buying services the trust does not need.
Administrative = Fidelity is serving as a corporate fiduciary, assuming all responsibilities as either co or sole trustee.

Agent for = Fidelity does not serve as trustee. Your trustee delegates certain maintenance tasks to Fidelity such as completing annual tax forms, accounting, reports, etc.

As with you, my trusts will allow the beneficiary to serve as sole trustee, with the option to appoint an independent trustee if needed or desired.
I plan to review my trusts with our local Fidelity rep prior to final signatures. I will again ask for confirmation that, if hired as independent trustee, they would follow my trust's simple investment directions without invoking additional charges for "portfolio management services."

afan
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Re: Need A Trust Company

Post by afan » Sun Apr 17, 2016 4:14 pm

NMJack wrote:
afan wrote:Vanguard does not require investment management at 0.7% prior to serving as trustee.
I hope you are right about that.

I think the issue is the language "prior to". You do not have to first establish an investment management relationship, pay the 0.7%, THEN hire them as trustee at an extra fee.

You hire them to be a trustee, and they charge 0.7% on the first $1M, which includes investment management. Fee goes down on higher amounts. Plus the $2,500 fee per trust registration.
Agent for = Fidelity does not serve as trustee. Your trustee delegates certain maintenance tasks to Fidelity such as completing annual tax forms, accounting, reports, etc.
And that is the question. Just what is included in "etc"? Depending on what is in there, it may be all I need. The investment management is trivial- given a choice I would not pay anyone anything for that. But the accounting and statements might be worth something. Preparing tax returns could be worth it, since they do have to be done and I want someone other than myself doing that. But not clear whether the prepare tax returns, or prepare the reports on which tax returns are based. I get 1099's from the brokerage firm without a trust agent and with no cost.

I would love to know what Fidelity actually does for that fee. Could be interesting.
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

Ron
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Re: Need A Trust Company

Post by Ron » Sun Apr 17, 2016 4:29 pm

Here's who we use for our trust services.

http://www.theprivatetrustcompany.com/aboutptc.htm

They do not manage our investments. We currently do that on our own, but have an investment company selected to take care of that function after our passing, in addition to having the trust activated at that time. All preparations were established through the services of our (elder care) attorney, who has also been tied into the "triad" plan for the benefit of our disabled son, after our passing.

- Ron

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Christine_NM
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Re: Need A Trust Company

Post by Christine_NM » Sun Apr 17, 2016 4:30 pm

For the house, some states allow a transfer-on-death deed to be filed with your county or other appropriate entity. This takes the house out of the owner's estate upon death (like a TOD bank account or an IRA with a named beneficiary) and the new owner can take care of the place immediately. That would save a lot of money and fuss.

I am planning to do this but have not got to it yet.
16% cash 48% stock 36% bond. Retired, w/d rate 2.85%

NMJack
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Re: Need A Trust Company

Post by NMJack » Sun Apr 17, 2016 4:37 pm

Ron wrote:Here's who we use for our trust services.

http://www.theprivatetrustcompany.com/aboutptc.htm

They do not manage our investments. We currently do that on our own, but have an investment company selected to take care of that function after our passing, in addition to having the trust activated at that time. All preparations were established through the services of our (elder care) attorney, who has also been tied into the "triad" plan for the benefit of our disabled son, after our passing.

- Ron
I couldn't find a fee schedule on their website. Do you mind if I ask how much they charge for trustee services without investment oversight?

Ron
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Re: Need A Trust Company

Post by Ron » Sun Apr 17, 2016 4:46 pm

NMJack wrote: I couldn't find a fee schedule on their website. Do you mind if I ask how much they charge for trustee services without investment oversight?
It depends on the trust agreement and the services that they perform. Unlike an investment manager with AUM fees, management of trusts (without responsibility for investments) is strictly based on a services fee. This could be quite expensive (in your eyes) when discussing a large remainder estate with many unrelated assets.

You (or your lawyer, or investment manager) could contact them to get a guesstimate on fees based specifically on your situation. I'm not willing to discuss our situation either publically or privately; sorry...

- Ron

NMJack
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Re: Need A Trust Company

Post by NMJack » Sun Apr 17, 2016 4:55 pm

Ron wrote:
NMJack wrote: I couldn't find a fee schedule on their website. Do you mind if I ask how much they charge for trustee services without investment oversight?
It depends on the trust agreement and the services that they perform. Unlike an investment manager with AUM fees, management of trusts (without responsibility for investments) is strictly based on a services fee. This could be quite expensive (in your eyes) when discussing a large remainder estate with many unrelated assets.

You (or your lawyer, or investment manager) could contact them to get a guesstimate on fees based specifically on your situation. I'm not willing to discuss our situation either publically or privately; sorry...

- Ron
Not a problem. I really wasn't interested in your particular situation, just a ballpark of what they offer for various services. Most references we see to trustee fees are a percentage of the trust assets (which for many of us with passive investment approaches can seem quite inflated for large trusts). I do like a fixed fee approach.

bsteiner
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Re: Need A Trust Company

Post by bsteiner » Sun Apr 17, 2016 5:13 pm

NMJack wrote:
Ron wrote:Here's who we use for our trust services.

http://www.theprivatetrustcompany.com/aboutptc.htm

They do not manage our investments. We currently do that on our own, but have an investment company selected to take care of that function after our passing, in addition to having the trust activated at that time. All preparations were established through the services of our (elder care) attorney, who has also been tied into the "triad" plan for the benefit of our disabled son, after our passing.
I couldn't find a fee schedule on their website. Do you mind if I ask how much they charge for trustee services without investment oversight?
I was able to find their fee schedule online. The fee schedule I found online said they charge 0.65% on the first $1 million, 0.55% on the next $2 million, 0.45% on the next $2 million, 0.35% on the next $5 million, and 0.25% on the excess above $10 million, with a minimum of $4,200 a year, plus $475 a year. Since that doesn't include investment management, it doesn't seem like a bargain. It would seem to make more sense to use a traditional bank or trust company that will also manage the assets, or one that will act at a lower price if they're not managing the assets if you want the assets to be invested in some other way.

A trusts and estates lawyer might have better relationships with banks and trust companies and might be able to provide more suggestions.

NMJack
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Re: Need A Trust Company

Post by NMJack » Sun Apr 17, 2016 6:21 pm

bsteiner wrote: The fee schedule I found online said they charge 0.65% on the first $1 million, 0.55% on the next $2 million, 0.45% on the next $2 million, 0.35% on the next $5 million, and 0.25% on the excess above $10 million, with a minimum of $4,200 a year, plus $475 a year. Since that doesn't include investment management, it doesn't seem like a bargain.
Thanks for finding that.

Yikes!! It's like they are agreeing to do less (i.e. let the beneficiary/grantor use their own trusted investment advisor....) if you agree to pay them more. This is an interesting segment of the whole financial management universe. While I admire the business approach, it is sad to see just how much money some firms are willing to suck out of the funds that well intentioned people are simply trying to leave to their children.

afan
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Re: Need A Trust Company

Post by afan » Mon Apr 18, 2016 8:26 am

If you forego "professional investment management" and do it yourself, those fees seem a hair cheaper than Vanguard for smaller trusts. For those who want the administrative work handled by a corporate trustee and are happy to run a 3 fund portfolio themselves, this is an interesting option. If you do want someone else to manage investments eventually then there are some shops that will do that for a very low flat fee.

With either approach this seems like a good option.
Remember that the professional managers are likely to be subtracting value, not adding it, if they anything more than simple cap weighted indexing.
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

Topic Author
EMDW
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Re: Need A Trust Company

Post by EMDW » Fri Nov 04, 2016 4:40 am

sari wrote:Hello,
Previous post: "We need a trust company for a family revocable trust. We will be the trustee and manager of the trust until our demise. We are considering Vanguard as the custodian for the trust (taxable accounts already with Vanguard and 401k are Vanguard funds; spouse uses other companies for retirement etc). Upon our demise, we would need Vanguard to take over as trustee (eg. Vanguard trust management services). Our CPA company has agreed to sell our primary resident and put the proceeds into the trust upon our demise; Vanguard will not accept responsibility for this. Our attorney has recommended a local investment trust company. Any sights on Vanguard and if our plan sounds reasonable? Thank you."

Update: Vanguard updated fees for a successor trust: 0.3% AUM for the first 1-5 million, trust administration fee: 0.25% or minimum of $3500 a year. Local trust company fee is 1% for AUM and trust administration.
Attorney's recommendation: use local trust company as they will hire a real estate agent to sell the home and proceeds will go to the trust. Also, wants me to manage the assets (stocks, bonds, cash, home) if spouse dies before me and wants the trust company to take over trust administration if I die before spouse because he wants to make sure my extended family receives their share as I've contributed the most to the assets (spouse is surprise about the trust taking over when I die); Spouse will keep the house. Our agreement is that a larger percentage(70%) is to go to my side of the family and a smaller percentage to his side (30%). We have no children. Any suggestions?

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