Niece & Vanguard as co-trustees

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Myopic squirrel
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Niece & Vanguard as co-trustees

Post by Myopic squirrel » Sun Jun 24, 2018 3:18 pm

We're setting up a trust, naming our son as the trustee. He's an extremely responsible 33 year old and very good with managing money. In event that he could not serve, we are considering naming our 40 year old niece (an attorney) whom we trust (pardon the pun) as a co-trustee with Vanguard. The reason for including VG is to relieve her of the burdens of investing, and she would deal with the administration of the funds. Comments please & thank you in advance.

Gill
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Re: Niece & Vanguard as co-trustees

Post by Gill » Sun Jun 24, 2018 3:25 pm

Sounds like a good arrangement depending on the duration of the trust and those who are the beneficiaries.
Gill

Myopic squirrel
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Re: Niece & Vanguard as co-trustees

Post by Myopic squirrel » Mon Jun 25, 2018 9:25 am

Gill,

Thank you for your reply. The beneficiaries would be his children & his wife.

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CABob
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Re: Niece & Vanguard as co-trustees

Post by CABob » Mon Jun 25, 2018 12:25 pm

Just wondering, will the niece and Vanguard be comfortable with this arrangement? And will it operate efficiently? I can envision some potential conflicts.
Bob

afan
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Re: Niece & Vanguard as co-trustees

Post by afan » Mon Jun 25, 2018 1:48 pm

Just make sure there are provisions for changing trustees if necessary. Things change and what is a good corporate trustee now may not be ideal decades in the future.

I assume your son could hire Vanguard as asset manager or co trustee if he wanted to?

If your niece is going to administer the funds and would just need an investment manager, Vanguard will do that at a lower price than what they charge to be trustee.
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

Myopic squirrel
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Re: Niece & Vanguard as co-trustees

Post by Myopic squirrel » Tue Jun 26, 2018 2:02 pm

Afan,

Excellent suggestions - especially re: asset management v. co-trustee. Thank you!

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Sandtrap
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Re: Niece & Vanguard as co-trustees

Post by Sandtrap » Tue Jun 26, 2018 2:10 pm

I have a provision in my trust that requires the trustee to seek Vanguard, Schwab, or equiv. consult as well as CPA and Legal Counsel in a variety of matters. The Trust Protector ensures that the trust provisions are carried out with transparency and accountability.
Also have a version of my IPS Statement as a guideline.

j :D

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FIREchief
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Re: Niece & Vanguard as co-trustees

Post by FIREchief » Tue Jun 26, 2018 2:33 pm

Sandtrap wrote:
Tue Jun 26, 2018 2:10 pm
I have a provision in my trust that requires the trustee to seek Vanguard, Schwab, or equiv. consult as well as CPA and Legal Counsel in a variety of matters. The Trust Protector ensures that the trust provisions are carried out with transparency and accountability.
Also have a version of my IPS Statement as a guideline.

j :D
Will the trust protector be compensated?
Will the trustee be compensated?
We know the financial advisory firm will be compensated.
We know the CPA will be compensated.

Are you really willing to have your trust assets drained by all those different entities?

Are you referencing your IPS formally within the trust? Is it a "guideline" or a "requirement" that the trust assets be invested accordingly?
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

afan
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Re: Niece & Vanguard as co-trustees

Post by afan » Tue Jun 26, 2018 2:40 pm

I would hope my trustee would seek advice from an attorney, when it was needed. I would hope the trustee would consult an accountant, when that was needed. But I cannot see the point in including in my trust the instruction to "get help from appropriate people when necessary." If the trustee could not figure that out then I did a terrible job of picking trustees.

I would not put a particular company in the trust itself. I have told my successor trustee that Vanguard would be a good option if the trustee found doing the work to be too much trouble. That is true now. By the time, if ever, the trustee has to do something, I have no idea what company would be the best choice. I have reasons to suspect that Vanguard might be on the short list, but I leave that to the trustee to figure out when the time comes.
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

afan
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Re: Niece & Vanguard as co-trustees

Post by afan » Tue Jun 26, 2018 2:42 pm

I should note that,. RIGHT NOW, I would be heavily inclined to pick Vanguard. But I am not picking a trustee right now.
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

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Sandtrap
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Re: Niece & Vanguard as co-trustees

Post by Sandtrap » Tue Jun 26, 2018 3:37 pm

FIREchief wrote:
Tue Jun 26, 2018 2:33 pm
Sandtrap wrote:
Tue Jun 26, 2018 2:10 pm
I have a provision in my trust that requires the trustee to seek Vanguard, Schwab, or equiv. consult as well as CPA and Legal Counsel in a variety of matters. The Trust Protector ensures that the trust provisions are carried out with transparency and accountability.
Also have a version of my IPS Statement as a guideline.

j :D
Will the trust protector be compensated?
Will the trustee be compensated?
We know the financial advisory firm will be compensated.
We know the CPA will be compensated.

Are you really willing to have your trust assets drained by all those different entities?

Are you referencing your IPS formally within the trust? Is it a "guideline" or a "requirement" that the trust assets be invested accordingly?
Hourly consultant relationships only.
Guidelines.
j

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FIREchief
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Re: Niece & Vanguard as co-trustees

Post by FIREchief » Tue Jun 26, 2018 5:38 pm

Sandtrap wrote:
Tue Jun 26, 2018 3:37 pm
FIREchief wrote:
Tue Jun 26, 2018 2:33 pm
Sandtrap wrote:
Tue Jun 26, 2018 2:10 pm
I have a provision in my trust that requires the trustee to seek Vanguard, Schwab, or equiv. consult as well as CPA and Legal Counsel in a variety of matters. The Trust Protector ensures that the trust provisions are carried out with transparency and accountability.
Also have a version of my IPS Statement as a guideline.

j :D
Will the trust protector be compensated?
Will the trustee be compensated?
We know the financial advisory firm will be compensated.
We know the CPA will be compensated.

Are you really willing to have your trust assets drained by all those different entities?
Hourly consultant relationships only.
I'm surprised that Vanguard et al will provide financial guidance on an hourly basis. I hadn't heard of that before.

How can the Trust Protector ensure that the trust provisions are being carried out if he/she isn't serving on a constant basis? Unless the trust is drafted very carefully, my fears about a trust protector are that they could become one more constant 1% annual drain on the trust assets (over and above the independent trustee that is being watched over).

I'm just not picturing how this would all work. Thanks.
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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FIREchief
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Re: Niece & Vanguard as co-trustees

Post by FIREchief » Tue Jun 26, 2018 5:42 pm

Sandtrap wrote:
Tue Jun 26, 2018 3:37 pm
FIREchief wrote:
Tue Jun 26, 2018 2:33 pm
Sandtrap wrote:
Tue Jun 26, 2018 2:10 pm
I have a provision in my trust that requires the trustee to seek Vanguard, Schwab, or equiv. consult as well as CPA and Legal Counsel in a variety of matters. The Trust Protector ensures that the trust provisions are carried out with transparency and accountability.
Also have a version of my IPS Statement as a guideline.

j :D
Are you referencing your IPS formally within the trust? Is it a "guideline" or a "requirement" that the trust assets be invested accordingly?
Guidelines.
Unless the trust specifically instructs the trustee to invest in accordance with your "guidelines," I believe that your state's prudent investor rules will override them, and the independent trustee will feel compelled (by law and by profit motive) to invest in a less efficient portfolio that looks more like what financial advisors concoct. This is the problem any time a trust Grantor (including Warren Buffet) "recommends" investment strategies in advance.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

afan
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Re: Niece & Vanguard as co-trustees

Post by afan » Tue Jun 26, 2018 5:46 pm

I am not a lawyer, so my experience is very limited. I only am aware of trust protectors as having certain specific powers that may never be exercised. I have not heard of them being responsible for ensuring that the trustee is following the terms of the trust.
I am not usually a particularly trusting person, but I would be amazed if a corporate trustee were NOT to follow the terms of the trust. I view that as the one thing you would not have to worry about when an entity that makes it their business is serving as trustee. They don't want to get sued and lose for ignoring the terms of the trust.
I would be more worried about slavish devotion to every minute detail and long, expensive, processes if anything had to be changed.

If we are lucky, maybe Gill, who spent his career as a trust officer, can comment on the reliability of corporate trustees in this regard and the usual role of trust protectors?
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

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