Trust investment choices for a difficult beneficiary

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 2:18 pm

A trust allows for the trustee to invest in stocks, bonds, real estate, annuities, or life insurance for the benefit of the beneficiaries. The trust language says the trustee shall consider the needs of the primary beneficiary paramount without regard for the remainder beneficiaries. The primary beneficiary is a very difficult person always complaining about the amount of money he receives, accusing the trustee of hoarding funds, dissatisfaction when the value of the trust decreases due to market losses, theft, etc. These claims are unfounded; he receives between 3.5-4% of the trust value each year along with the appropriate accountings. The trust originally gave the trustee total discretion as to the amount if any of distributions to the beneficiary. The trustee is now required to distribute a minimum of 3%/year as the result of a settlement agreement reached several years ago and has discretion to distribute more as he sees fit. The portfolio is currently invested in a Boglehead type conservative portfolio by a Registered Investment Advisor using low cost index funds with a 40/60 allocation. The trustee is considering using the funds to purchase an immediate annuity which would give a payout of almost 6% for the remainder of the beneficiary’s life with the remainder going to the remainder beneficiaries if the primary were to die prematurely and there was money left in the annuity account. This arrangement would boost the payout to the primary beneficiary by about $20,000 from $38,000/year to $58,000/year. The trustee would ask the beneficiary for his written approval that he understands that this amount is the maximum he will ever receive in income and the decision is irreversible. Would the trustee as a fiduciary be acting prudently in the beneficiary’s best interest given the scenario presented? Thoughts?
Last edited by FBN2014 on Fri Apr 12, 2019 10:07 am, edited 3 times in total.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

trustquestioner
Posts: 69
Joined: Sun Sep 03, 2017 6:50 pm

Re: Trust investment choices for a difficult beneficiary

Post by trustquestioner » Thu Apr 11, 2019 2:38 pm

Why hasn’t the trustee resigned? Is this a corporate or individual trustee?

The annuity seems pretty bad to me.

User avatar
dodecahedron
Posts: 4178
Joined: Tue Nov 12, 2013 12:28 pm

Re: Trust investment choices for a difficult beneficiary

Post by dodecahedron » Thu Apr 11, 2019 2:43 pm

trustquestioner wrote:
Thu Apr 11, 2019 2:38 pm
The annuity seems pretty bad to me.
Impossible to say whether the annuity is bad or not without knowing the age and health status of the beneficiary.

Also, your proposed annuity would leave the secondary beneficiaries with nothing if the primary lives to his life expectancy or beyond. Is that in keeping with the original grantor´s intentions.
Last edited by dodecahedron on Thu Apr 11, 2019 2:47 pm, edited 1 time in total.

aristotelian
Posts: 5486
Joined: Wed Jan 11, 2017 8:05 pm

Re: Trust investment choices for a difficult beneficiary

Post by aristotelian » Thu Apr 11, 2019 2:47 pm

If you are referring to the "prudent investor" legal standard, my impression (not a lawyer) is that it is more of a guideline. It does not say that this or that asset class is allowed or not. If you think an annuity would serve the trustee's best interest and you've done your due diligence, I don't see how anyone could accuse you of wrongdoing. If you consult with a fiduciary and review the annuity, that would give you solid ground since they are held to the same guidelines.

ResearchMed
Posts: 8501
Joined: Fri Dec 26, 2008 11:25 pm

Re: Trust investment choices for a difficult beneficiary

Post by ResearchMed » Thu Apr 11, 2019 2:47 pm

FBN2014 wrote:
Thu Apr 11, 2019 2:18 pm
A trust allows for the trustee to invest in stocks, bonds, real estate, annuities, or life insurance for the benefit of the beneficiaries. The trust language says the trustee shall consider the needs of the primary beneficiary paramount without regard for the remainder beneficiaries. The primary beneficiary is a very difficult person always complaining about the amount of money he receives, accusing the trustee of hoarding funds, dissatisfaction when the value of the trust decreases due to market losses, theft, etc. These claims are unfounded; he receives between 3.5-4% of the trust value each year along with the appropriate accountings. The trust originally gave the trustee total discretion as to the amount if any of distributions to the beneficiary. The trustee is now required to distribute a minimum of 3%/year as the result of a settlement agreement reached several years ago and has discretion to distribute more as he sees fit. The portfolio is currently invested in a Boglehead type conservative portfolio by a Registered Investment Advisor using low cost index funds with a 40/60 allocation. The trustee is considering using the funds to purchase an immediate annuity which would give a payout of almost 6% for the remainder of the beneficiary’s life with the remainder going to the remainder beneficiaries if the primary were to die prematurely and there was money left in the annuity account. This arrangement would boost the payout to the primary beneficiary by about $20,000/year to $58,000. The trustee would ask the beneficiary for his written approval that he understands that this amount is the maximum he will ever receive in income and the decision is irreversible. Would the trustee as a fiduciary be acting prudently in the beneficiary’s best interest given the scenario presented? Thoughts?
Don't compare the "payout percentage" with the "returns". The former includes a portion of the principal.
If you make this comparison to the beneficiary to get his/her permission, you are setting yourself up for possible trouble later.

And yes, the age/health of beneficiary is important to understand the payout rate.

Would the trust terms allow a setup like this where after the period certain time, there is absolutely nothing for the others?
Paying 3% or such is unlikely to have this effect.

RM
This signature is a placebo. You are in the control group.

Dottie57
Posts: 5739
Joined: Thu May 19, 2016 5:43 pm

Re: Trust investment choices for a difficult beneficiary

Post by Dottie57 » Thu Apr 11, 2019 2:52 pm

What is the purpose of remainder beneficiaries? So should all money be paid to primary? It looks like you are saving money for the remainders. Not trying to be nasty, just curious.

delamer
Posts: 7500
Joined: Tue Feb 08, 2011 6:13 pm

Re: Trust investment choices for a difficult beneficiary

Post by delamer » Thu Apr 11, 2019 3:05 pm

This is an issue that the trustee needs legal advice on before proceeding.

adamthesmythe
Posts: 2619
Joined: Mon Sep 22, 2014 4:47 pm

Re: Trust investment choices for a difficult beneficiary

Post by adamthesmythe » Thu Apr 11, 2019 3:18 pm

delamer wrote:
Thu Apr 11, 2019 3:05 pm
This is an issue that the trustee needs legal advice on before proceeding.
I'm guessing OP is the trustee??

Anyway...I would think the trustee, whoever he is, should take legal advice on interpretation of the trust documents, and then do exactly as he believes appropriate.

Then unfriend the beneficiary and don't answer any calls.

bsteiner
Posts: 3860
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Trust investment choices for a difficult beneficiary

Post by bsteiner » Thu Apr 11, 2019 3:31 pm

An interesting question. I'm not sure it's wise. It might be better for the trustees to resign in favor of someone better able to deal with the beneficiaries, perhaps a bank or trust company. There are some that will take trusts of this size. But that doesn't mean the trustees will be held liable.

The remainder beneficiaries might claim that the trust wasn't used up for the benefit of the primary beneficiary, but rather it was in substantial part used up by the cost of the annuity. But it might be difficult for them to explain that.

The trustee might want to get the consent of the adult remainder beneficiaries. Note that in the Dumont case, https://law.justia.com/cases/new-york/o ... 50647.html (Monroe County Surrogate's Court), https://scholar.google.com/scholar_case ... =4,215,216 (4th Dept.), the presumptive remainder beneficiaries died and the remote contingent beneficiaries took.

I'm only aware of one case where beneficiaries brought a claim against a trustee for investing in an annuity, the Berget case in Minnesota, https://cases.justia.com/minnesota/cour ... 1418077703, in which the appellate court ruled in favor of the trustee.
Last edited by bsteiner on Thu Apr 11, 2019 3:33 pm, edited 1 time in total.

123
Posts: 4489
Joined: Fri Oct 12, 2012 3:55 pm

Re: Trust investment choices for a difficult beneficiary

Post by 123 » Thu Apr 11, 2019 3:33 pm

FBN2014 wrote:
Thu Apr 11, 2019 2:18 pm
...The trust language says the trustee shall consider the needs of the primary beneficiary paramount without regard for the remainder beneficiaries. The primary beneficiary is a very difficult person ...
From my perspective an annuity for the primary beneficiary would satisfy the mandate of the trust. An annuity payout guarantee based on the actuarial expected remaining lifetime of the primary beneficiary seems in keeping with the spirit of the trust.

Edited to add:
I'm guessing that if the beneficiary is "difficult" monthly distributions are the most practical.
Last edited by 123 on Thu Apr 11, 2019 3:43 pm, edited 1 time in total.
The closest helping hand is at the end of your own arm.

depressed
Posts: 106
Joined: Sun Oct 14, 2018 4:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by depressed » Thu Apr 11, 2019 3:40 pm

I have no special knowledge of trusts, but to me, it would be impossible to know whether the trustee is acting in the beneficiary's best interest without knowing the fees (if any) paid to the trustee, the financial advisor, and any others. What are those amounts currently? What would those amounts be if the trustee went forward with the annuity plan?

Gill
Posts: 5185
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Trust investment choices for a difficult beneficiary

Post by Gill » Thu Apr 11, 2019 3:57 pm

FBN2014 wrote:
Thu Apr 11, 2019 2:18 pm
The trust language says the trustee shall consider the needs of the primary beneficiary paramount without regard for the remainder beneficiaries.
Were it not for the above language in the trust instrument, I would be totally opposed to investing the entire trust in an annuity. However, I feel this language gives the trustee some comfort in doing so, particularly in the type of annuity that guarantees a return of the remaining principal in the event of a premature death. It would appear this would totally destroy the trust and, in fact, it might be attractive to do just that. The trustee should seek the guidance of the attorney for the trust and obtain approvals from the income beneficiary, possibly the remaindermen and possibly even the court having jurisdiction over the trust.
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

ResearchMed
Posts: 8501
Joined: Fri Dec 26, 2008 11:25 pm

Re: Trust investment choices for a difficult beneficiary

Post by ResearchMed » Thu Apr 11, 2019 4:10 pm

Gill wrote:
Thu Apr 11, 2019 3:57 pm
FBN2014 wrote:
Thu Apr 11, 2019 2:18 pm
The trust language says the trustee shall consider the needs of the primary beneficiary paramount without regard for the remainder beneficiaries.
Were it not for the above language in the trust instrument, I would be totally opposed to investing the entire trust in an annuity. However, I feel this language gives the trustee some comfort in doing so, particularly in the type of annuity that guarantees a return of the remaining principal in the event of a premature death. It would appear this would totally destroy the trust and, in fact, it might be attractive to do just that. The trustee should seek the guidance of the attorney for the trust and obtain approvals from the income beneficiary, possibly the remaindermen and possibly even the court having jurisdiction over the trust.
Gill
Taking the wording literally ("without regard for the remainder beneficiaries") would suggest (to this non-attorney) that one would do better to max out the annuity payments, well, "without regard for the remainder beneficiaries", and thus NOT get anything like a period certain.

Yes, speaking with a trust attorney is called for, at least one consult. And then the court, eventually?

IF the beneficiary is on board with this, it also relieves the Trustee of ongoing "how to disburse the money", which might be helpful with a difficult beneficiary.
Just be SURE the beneficiary really understands what this means (and also understands any inflation risks, if a non-adjusted annuity is considered).

RM
This signature is a placebo. You are in the control group.

dbr
Posts: 28557
Joined: Sun Mar 04, 2007 9:50 am

Re: Trust investment choices for a difficult beneficiary

Post by dbr » Thu Apr 11, 2019 4:13 pm

As a devil's advocate position it would seem that simply turning over the entirety of the assets to the beneficiary would meet the terms of the trust. Note that as pointed out above using the assets to buy an annuity has the same result except that the interests of the remaindermen can be partially protected by some annuity rider and the beneficiary has been hamstrung in his use of the assets. It would seem a question would be why this trust exists in the first place. It is possible the beneficiary is justified in his complaints.

I am not a lawyer so the only real answer is to consult an attorney.

Gill
Posts: 5185
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Trust investment choices for a difficult beneficiary

Post by Gill » Thu Apr 11, 2019 4:22 pm

ResearchMed wrote:
Thu Apr 11, 2019 4:10 pm


Taking the wording literally ("without regard for the remainder beneficiaries") would suggest (to this non-attorney) that one would do better to max out the annuity payments, well, "without regard for the remainder beneficiaries", and thus NOT get anything like a period certain.
Yes, I agree this language gives the trustee much greater power to favor the income beneficiary, but I would still feel uncomfortable buying a pure single life SPIA and guaranteeing the remanindermen get nothing. This would also be the case with distributing the entire trust to the beneficiary as suggested above. The solution suggested by the OP at least reserves the possibility the remaindermen will receive something on the death of the income beneficiary. I would think the trustee might like to be relieved of responsibility for this trust and might find it difficult to find a successor who was aware of the facts. In my days with corporate fiduciaries I wouldn't have been too inclined to accept this trust. Accordingly, I feel that with the blessing of counsel for the trust, this is a good solution.

Gill

P.S. I guess remaindermen are now known as remainder persons but it's been part of the common law for centuries and I've been out of law school far too long to change. :happy
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

Quaestner
Posts: 110
Joined: Tue Jul 18, 2017 6:39 pm

Re: Trust investment choices for a difficult beneficiary

Post by Quaestner » Thu Apr 11, 2019 4:34 pm

Does the trustee think this "difficult" beneficiary has the wherewithal to manage the constant payout for their long-term best interest? Would an inflation adjusted annuity better meet the intent of the trust? From my point of view, any annuity would seem to preclude the trustee from increasing the payout when the beneficiary most needs it (say for assisted living in the future). In reading about the trust it seemed like it was designed with flexible payout possibility based on the need (not necessarily want) of the beneficiary. Reading between the lines, it sounds like the trustee is sick of dealing with the beneficiary. However, to fulfill the intent of the trust, the annuity might not work. I agree that maybe the trustee needs to resign.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:00 pm

trustquestioner wrote:
Thu Apr 11, 2019 2:38 pm
Why hasn’t the trustee resigned? Is this a corporate or individual trustee?

The annuity seems pretty bad to me.
Individual trustee, sibling.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

ResearchMed
Posts: 8501
Joined: Fri Dec 26, 2008 11:25 pm

Re: Trust investment choices for a difficult beneficiary

Post by ResearchMed » Thu Apr 11, 2019 7:08 pm

FBN2014 wrote:
Thu Apr 11, 2019 7:00 pm
trustquestioner wrote:
Thu Apr 11, 2019 2:38 pm
Why hasn’t the trustee resigned? Is this a corporate or individual trustee?

The annuity seems pretty bad to me.
Individual trustee, sibling.
Is this a sort of Spendthrift or Special Needs Trust, where the beneficiary was thought to be unable to manage the money well?
The reasoning behind the creation of the Trust might inform some of these decisions.

RM
This signature is a placebo. You are in the control group.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:12 pm

dodecahedron wrote:
Thu Apr 11, 2019 2:43 pm
trustquestioner wrote:
Thu Apr 11, 2019 2:38 pm
The annuity seems pretty bad to me.
Impossible to say whether the annuity is bad or not without knowing the age and health status of the beneficiary.

Also, your proposed annuity would leave the secondary beneficiaries with nothing if the primary lives to his life expectancy or beyond. Is that in keeping with the original grantor´s intentions.
Beneficiary is 62, in good health. There are actually two trusts: family trust and insurance trust. The insurance trust has this wording regarding remaindermen: "The trustee is directed to conserve and accumulate the trust estate to the extent feasible , due to the unforeseeablity of the future needs of ________. However, accumulation or use of the trust is to be determined solely on the basis of the needs of ______, without regard to the interests of the remaindermen." The family trust does not have this language.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:18 pm

Dottie57 wrote:
Thu Apr 11, 2019 2:52 pm
What is the purpose of remainder beneficiaries? So should all money be paid to primary? It looks like you are saving money for the remainders. Not trying to be nasty, just curious.
No, not saving for the remaindermen. The 3% required distribution was determined based on consultation with a CFP who is an RIA and based on the primary beneficiary's age, health, and likely longevity so that the portfolio would not run out of money based on a 35 year distribution period.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:21 pm

adamthesmythe wrote:
Thu Apr 11, 2019 3:18 pm
delamer wrote:
Thu Apr 11, 2019 3:05 pm
This is an issue that the trustee needs legal advice on before proceeding.
I'm guessing OP is the trustee??

Anyway...I would think the trustee, whoever he is, should take legal advice on interpretation of the trust documents, and then do exactly as he believes appropriate.

Then unfriend the beneficiary and don't answer any calls.
Yes, OP is the trustee. The beneficiary never calls me, only sends unfriendly emails and has instructed me not to ever call him.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

dbr
Posts: 28557
Joined: Sun Mar 04, 2007 9:50 am

Re: Trust investment choices for a difficult beneficiary

Post by dbr » Thu Apr 11, 2019 7:35 pm

I am having trouble reconciling 3% withdrawal being $20,000 and less than 6% being $58,000.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:36 pm

depressed wrote:
Thu Apr 11, 2019 3:40 pm
I have no special knowledge of trusts, but to me, it would be impossible to know whether the trustee is acting in the beneficiary's best interest without knowing the fees (if any) paid to the trustee, the financial advisor, and any others. What are those amounts currently? What would those amounts be if the trustee went forward with the annuity plan?
The trustee is a sibling and takes no fee. The financial advisor fee is .37% per year. With an annuity there would be no advisor fee since there would be no need for an advisor. The insurance company would just send a monthly check.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:41 pm

Gill wrote:
Thu Apr 11, 2019 4:22 pm
ResearchMed wrote:
Thu Apr 11, 2019 4:10 pm


Taking the wording literally ("without regard for the remainder beneficiaries") would suggest (to this non-attorney) that one would do better to max out the annuity payments, well, "without regard for the remainder beneficiaries", and thus NOT get anything like a period certain.
Yes, I agree this language gives the trustee much greater power to favor the income beneficiary, but I would still feel uncomfortable buying a pure single life SPIA and guaranteeing the remanindermen get nothing. This would also be the case with distributing the entire trust to the beneficiary as suggested above. The solution suggested by the OP at least reserves the possibility the remaindermen will receive something on the death of the income beneficiary. I would think the trustee might like to be relieved of responsibility for this trust and might find it difficult to find a successor who was aware of the facts. In my days with corporate fiduciaries I wouldn't have been too inclined to accept this trust. Accordingly, I feel that with the blessing of counsel for the trust, this is a good solution.

Gill

P.S. I guess remaindermen are now known as remainder persons but it's been part of the common law for centuries and I've been out of law school far too long to change. :happy
There are actually two trusts: family trust and insurance trust. The insurance trust has this wording regarding remaindermen: "The trustee is directed to conserve and accumulate the trust estate to the extent feasible , due to the unforeseeablity of the future needs of ________. However, accumulation or use of the trust is to be determined solely on the basis of the needs of ______, without regard to the interests of the remaindermen." The family trust does not have this language so the remaindermen would have to be considered unless they agreed with this strategy. There is also a small inherited IRA which pays out to the family trust as the beneficiary and is then distributed to the primary beneficiary, about $5,000/year and rising as the RMD increases. Your correct, the trustee would like to be relieved of this burden and a successor trustee is not likely to want to take this on once the history of the beneficiary is known: two foreclosures, a bankruptcy, 3 marriages, totally irresponsible with money. He would most likely use all the income from an annuity to get loans to buy a new truck, new house, etc. and then not pay the loans.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

depressed
Posts: 106
Joined: Sun Oct 14, 2018 4:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by depressed » Thu Apr 11, 2019 7:50 pm

FBN2014 wrote:
Thu Apr 11, 2019 7:36 pm
depressed wrote:
Thu Apr 11, 2019 3:40 pm
I have no special knowledge of trusts, but to me, it would be impossible to know whether the trustee is acting in the beneficiary's best interest without knowing the fees (if any) paid to the trustee, the financial advisor, and any others. What are those amounts currently? What would those amounts be if the trustee went forward with the annuity plan?
The trustee is a sibling and takes no fee. The financial advisor fee is .37% per year. With an annuity there would be no advisor fee since there would be no need for an advisor. The insurance company would just send a monthly check.
In my opinion, the current fees are good, particularly because the investments are in low-cost index funds. As both sibling and trustee, I know you're in an emotionally stressful position and am sorry to hear about the difficulties with the beneficiary. I don't have any real advice for your next step. I probably would not purchase the annuity, but I don't know what leads me to say that. Will the beneficiary, by any chance, start taking social security payments at some time in the next few years (or is that already underway)? If the SS is on the near horizon, then I might increase the payout temporarily until that occurs, though you'd need to make it clear that the increase is temporary.

Good luck, and I hope you can find a solution that brings you peace.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:51 pm

Quaestner wrote:
Thu Apr 11, 2019 4:34 pm
Does the trustee think this "difficult" beneficiary has the wherewithal to manage the constant payout for their long-term best interest? Would an inflation adjusted annuity better meet the intent of the trust? From my point of view, any annuity would seem to preclude the trustee from increasing the payout when the beneficiary most needs it (say for assisted living in the future). In reading about the trust it seemed like it was designed with flexible payout possibility based on the need (not necessarily want) of the beneficiary. Reading between the lines, it sounds like the trustee is sick of dealing with the beneficiary. However, to fulfill the intent of the trust, the annuity might not work. I agree that maybe the trustee needs to resign.
Your analysis is pretty spot on. The problem is finding a successor willing to deal with the beneficiary. His history with his finances is not pretty, 2 foreclosures, 3 marriages, bankruptcy.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:54 pm

ResearchMed wrote:
Thu Apr 11, 2019 7:08 pm
FBN2014 wrote:
Thu Apr 11, 2019 7:00 pm
trustquestioner wrote:
Thu Apr 11, 2019 2:38 pm
Why hasn’t the trustee resigned? Is this a corporate or individual trustee?

The annuity seems pretty bad to me.
Individual trustee, sibling.
Is this a sort of Spendthrift or Special Needs Trust, where the beneficiary was thought to be unable to manage the money well?
The reasoning behind the creation of the Trust might inform some of these decisions.

RM
Not special needs trust although he has had problems working independently, holding a job. Has a history of undiagnosed and untreated learning issues. Definately cannot manage money, bankruptcy, 2 foreclosures, 3 marriages.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 7:59 pm

depressed wrote:
Thu Apr 11, 2019 7:50 pm
FBN2014 wrote:
Thu Apr 11, 2019 7:36 pm
depressed wrote:
Thu Apr 11, 2019 3:40 pm
I have no special knowledge of trusts, but to me, it would be impossible to know whether the trustee is acting in the beneficiary's best interest without knowing the fees (if any) paid to the trustee, the financial advisor, and any others. What are those amounts currently? What would those amounts be if the trustee went forward with the annuity plan?
The trustee is a sibling and takes no fee. The financial advisor fee is .37% per year. With an annuity there would be no advisor fee since there would be no need for an advisor. The insurance company would just send a monthly check.
In my opinion, the current fees are good, particularly because the investments are in low-cost index funds. As both sibling and trustee, I know you're in an emotionally stressful position and am sorry to hear about the difficulties with the beneficiary. I don't have any real advice for your next step. I probably would not purchase the annuity, but I don't know what leads me to say that. Will the beneficiary, by any chance, start taking social security payments at some time in the next few years (or is that already underway)? If the SS is on the near horizon, then I might increase the payout temporarily until that occurs, though you'd need to make it clear that the increase is temporary.

Good luck, and I hope you can find a solution that brings you peace.
He does turn 62 this year so he could take SS. Thanks for the good wishes. The only reason I have an advisor was to put a buffer between myself and beneficiary. Even that has not helped really as he blames me for the negative return in the portfolio in 2018 when there was a correction from October through December.
Last edited by FBN2014 on Thu Apr 11, 2019 8:03 pm, edited 1 time in total.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

dbr
Posts: 28557
Joined: Sun Mar 04, 2007 9:50 am

Re: Trust investment choices for a difficult beneficiary

Post by dbr » Thu Apr 11, 2019 8:02 pm

From a financial point of view completely converting assets intended for the long term support of indeterminate needs could never be recommended. The two major problems are matching inflation and having a reserve for increased expenses in case of additional disability, old age, or unanticipated circumstances. It can make sense in many cases to annuitize part of a portfolio, but if the intent of the annuity is to get you out of the trustee business, I don't think that answers.

The legal/fiduciary standing of using an annuity I have no idea.

Carefreeap
Posts: 2521
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Trust investment choices for a difficult beneficiary

Post by Carefreeap » Thu Apr 11, 2019 8:13 pm

FBN2014 wrote:
Thu Apr 11, 2019 7:51 pm
Quaestner wrote:
Thu Apr 11, 2019 4:34 pm
Does the trustee think this "difficult" beneficiary has the wherewithal to manage the constant payout for their long-term best interest? Would an inflation adjusted annuity better meet the intent of the trust? From my point of view, any annuity would seem to preclude the trustee from increasing the payout when the beneficiary most needs it (say for assisted living in the future). In reading about the trust it seemed like it was designed with flexible payout possibility based on the need (not necessarily want) of the beneficiary. Reading between the lines, it sounds like the trustee is sick of dealing with the beneficiary. However, to fulfill the intent of the trust, the annuity might not work. I agree that maybe the trustee needs to resign.
Your analysis is pretty spot on. The problem is finding a successor willing to deal with the beneficiary. His history with his finances is not pretty, 2 foreclosures, 3 marriages, bankruptcy.
Oh man, I feel for you!

My brother is similar. He also has ADHD which could be part of his problem. Scarily enough he was a "Financial Advisor" for a while. :oops:
I would extract myself from the situation as soon as you could. It's a thankless situation.

ResearchMed
Posts: 8501
Joined: Fri Dec 26, 2008 11:25 pm

Re: Trust investment choices for a difficult beneficiary

Post by ResearchMed » Thu Apr 11, 2019 8:14 pm

FBN2014 wrote:
Thu Apr 11, 2019 7:54 pm
ResearchMed wrote:
Thu Apr 11, 2019 7:08 pm
FBN2014 wrote:
Thu Apr 11, 2019 7:00 pm
trustquestioner wrote:
Thu Apr 11, 2019 2:38 pm
Why hasn’t the trustee resigned? Is this a corporate or individual trustee?

The annuity seems pretty bad to me.
Individual trustee, sibling.
Is this a sort of Spendthrift or Special Needs Trust, where the beneficiary was thought to be unable to manage the money well?
The reasoning behind the creation of the Trust might inform some of these decisions.

RM
Not special needs trust although he has had problems working independently, holding a job. Has a history of undiagnosed and untreated learning issues. Definately cannot manage money, bankruptcy, 2 foreclosures, 3 marriages.
It seemed likely to be something like this.

Do you *need* to be the trustee?
Could you arrange for someone else to do it? Trust dept at a bank, an attorney...?
This doesn't sound like a good situation for you, indefinitely into the future.

RM
This signature is a placebo. You are in the control group.

Gill
Posts: 5185
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Trust investment choices for a difficult beneficiary

Post by Gill » Thu Apr 11, 2019 8:20 pm

Others have suggested resigning, but who would accept this trust as trustee? I sure wouldn’t. I still like your idea of the annuity which still leaves the possibility of something for the remaindermen.
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

jminv
Posts: 782
Joined: Tue Jan 02, 2018 10:58 pm

Re: Trust investment choices for a difficult beneficiary

Post by jminv » Thu Apr 11, 2019 8:31 pm

I wonder how the sibling would take suddenly going from the lower current distribution rate to the annuity rate? This would probably reinforce his belief that the trustee has been miserly and/or cheating him all along considering his beliefs and his financial illiteracy. That could lead to him initiating legal action against the trustee. I'd run it all by a lawyer and make sure the beneficiary signs off on it and releases you from any claims if you go the annuity route. I'd probably do it to not have to deal with the situation anymore as the trustee themselves ages.

User avatar
prudent
Moderator
Posts: 6179
Joined: Fri May 20, 2011 2:50 pm

Re: Trust investment choices for a difficult beneficiary

Post by prudent » Thu Apr 11, 2019 8:41 pm

If I was the trustee, and the attorney told me it was appropriate to convert all to an annuity, I'd do it in a heartbeat if the beneficiary agreed. The beneficiary gets guaranteed income for life, and I am relieved of duty. If the trustee's attorney says it's OK and the beneficiary agrees, who is going to challenge?

So far we are afraid the remaindermen might have a complaint and the beneficiary might have a complaint. If I smelled that battle coming, I'd just get an attorney to facilitate having the court appoint a replacement trustee. The trustee can pay for it out of the trust.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 8:45 pm

Gill wrote:
Thu Apr 11, 2019 8:20 pm
Others have suggested resigning, but who would accept this trust as trustee? I sure wouldn’t. I still like your idea of the annuity which still leaves the possibility of something for the remaindermen.
Gill
I will be getting a legal opinion on this to cover my bases. After reading the comments, my thoughts are perhaps to use a portion of the portfolio to buy an inflation type immediate annuity and the remainder would be set aside to grow for the remaindermen. I would want the beneficiary to sign off on this with an agreement drawn up by my attorney that absolves me of any future legal jeopardy and his approval that he gets a certain amount each month that would grow with a set inflation rate of 2-3% and that is all he gets. That would be ideal and I would never have to deal with him again.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 8:48 pm

jminv wrote:
Thu Apr 11, 2019 8:31 pm
I wonder how the sibling would take suddenly going from the lower current distribution rate to the annuity rate? This would probably reinforce his belief that the trustee has been miserly and/or cheating him all along considering his beliefs and his financial illiteracy. That could lead to him initiating legal action against the trustee. I'd run it all by a lawyer and make sure the beneficiary signs off on it and releases you from any claims if you go the annuity route. I'd probably do it to not have to deal with the situation anymore as the trustee themselves ages.
My thoughts exactly. We would need to have an attorney drawn agreement that he signs off on and I would urge him to get his own attorney to explain what I am offering so he can't come back later and claim ignorance of what he signed under duress. This type of advice from everyone is why I love Bogleheads!
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

ResearchMed
Posts: 8501
Joined: Fri Dec 26, 2008 11:25 pm

Re: Trust investment choices for a difficult beneficiary

Post by ResearchMed » Thu Apr 11, 2019 8:57 pm

FBN2014 wrote:
Thu Apr 11, 2019 8:48 pm
jminv wrote:
Thu Apr 11, 2019 8:31 pm
I wonder how the sibling would take suddenly going from the lower current distribution rate to the annuity rate? This would probably reinforce his belief that the trustee has been miserly and/or cheating him all along considering his beliefs and his financial illiteracy. That could lead to him initiating legal action against the trustee. I'd run it all by a lawyer and make sure the beneficiary signs off on it and releases you from any claims if you go the annuity route. I'd probably do it to not have to deal with the situation anymore as the trustee themselves ages.
My thoughts exactly. We would need to have an attorney drawn agreement that he signs off on and I would urge him to get his own attorney to explain what I am offering so he can't come back later and claim ignorance of what he signed under duress. This type of advice from everyone is why I love Bogleheads!
Absolutely have him get his OWN attorney, just like with pre-nups. It's just a lot cleaner.
And just CYA as well as you can.
This sounds like a nightmarish situation, and you really don't want this to continue for years and years, and maybe decades!

Good luck!

RM
This signature is a placebo. You are in the control group.

Grt2bOutdoors
Posts: 20284
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Trust investment choices for a difficult beneficiary

Post by Grt2bOutdoors » Thu Apr 11, 2019 9:00 pm

FBN2014 wrote:
Thu Apr 11, 2019 7:21 pm
adamthesmythe wrote:
Thu Apr 11, 2019 3:18 pm
delamer wrote:
Thu Apr 11, 2019 3:05 pm
This is an issue that the trustee needs legal advice on before proceeding.
I'm guessing OP is the trustee??

Anyway...I would think the trustee, whoever he is, should take legal advice on interpretation of the trust documents, and then do exactly as he believes appropriate.

Then unfriend the beneficiary and don't answer any calls.
Yes, OP is the trustee. The beneficiary never calls me, only sends unfriendly emails and has instructed me not to ever call him.
Sounds like one of the cases presented in the book "Beyond the Grave".

While I'm not an attorney, it seems clear in the language that "accumulation of income in the trust is requested by the person creating the trust for fear that beneficiary is not able to have enough funds into the future to sustain one's self" and then contradicts that statement by saying payment is to be made to beneficiary to meet their needs". Well, as trustee, do you see an immediate and apparent need to vastly increase distributions to meet beneficiary requirements or is beneficiary requirements being fabricated to gain access to principal in an expedited manner? I see the reason for using the annuity, simply to remove yourself from this toxic relationship, you are simply viewed as a cold conduit (sorry to be blunt) between the money and the beneficiary. Can you be sure that beneficiary will not turn around and sue you if you pursue the annuity, even if they were to lose? My sense is that beneficiary wants the principal, they don't care about an income stream, they want you to give them the principal. The annuity leaves the principal with the insurance company - somehow I get the feeling that beneficiary is not going to be pleased with this proposal. What a mess!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Thu Apr 11, 2019 9:24 pm

Grt2bOutdoors wrote:
Thu Apr 11, 2019 9:00 pm
FBN2014 wrote:
Thu Apr 11, 2019 7:21 pm
adamthesmythe wrote:
Thu Apr 11, 2019 3:18 pm
delamer wrote:
Thu Apr 11, 2019 3:05 pm
This is an issue that the trustee needs legal advice on before proceeding.
I'm guessing OP is the trustee??

Anyway...I would think the trustee, whoever he is, should take legal advice on interpretation of the trust documents, and then do exactly as he believes appropriate.

Then unfriend the beneficiary and don't answer any calls.
Yes, OP is the trustee. The beneficiary never calls me, only sends unfriendly emails and has instructed me not to ever call him.
Sounds like one of the cases presented in the book "Beyond the Grave".

While I'm not an attorney, it seems clear in the language that "accumulation of income in the trust is requested by the person creating the trust for fear that beneficiary is not able to have enough funds into the future to sustain one's self" and then contradicts that statement by saying payment is to be made to beneficiary to meet their needs". Well, as trustee, do you see an immediate and apparent need to vastly increase distributions to meet beneficiary requirements or is beneficiary requirements being fabricated to gain access to principal in an expedited manner? I see the reason for using the annuity, simply to remove yourself from this toxic relationship, you are simply viewed as a cold conduit (sorry to be blunt) between the money and the beneficiary. Can you be sure that beneficiary will not turn around and sue you if you pursue the annuity, even if they were to lose? My sense is that beneficiary wants the principal, they don't care about an income stream, they want you to give them the principal. The annuity leaves the principal with the insurance company - somehow I get the feeling that beneficiary is not going to be pleased with this proposal. What a mess!
You are absolutely correct, he wants the principle which I guarantee based on his past history would be gone in a few years. Then he would try to sue me claiming that I should never have given him the money knowing he would squander it since he is financially illiterate.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

bsteiner
Posts: 3860
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Trust investment choices for a difficult beneficiary

Post by bsteiner » Thu Apr 11, 2019 9:34 pm

Gill wrote:
Thu Apr 11, 2019 4:22 pm
... I guess remaindermen are now known as remainder persons but it's been part of the common law for centuries and I've been out of law school far too long to change.
Remainderman and remaindermen are pretty well established, like yeoman. Also in most languages a mixed group takes the masculine plural form. But the trend is away from that, for example, Latinx.

I once had a trust where there were about a half dozen beneficiaries who came after the current beneficiary, all of whom were women, so I referred to them as remainderwomen. If they're not all of the same sex, I now use remainder beneficiaries, since it sounds better than remainderpersons.

Of course, that only works in the case of a trust. It doesn't work for the persons who take the fee after a life tenant's death. In that case, you have to use remainderman, remaindermen, remainderwoman, remainderwomen or remainderpersons. Fortunately we don't create very many legal life estates, and when we do, we don't usually have vested remainders. So we don't have to deal with that very often.

dbr
Posts: 28557
Joined: Sun Mar 04, 2007 9:50 am

Re: Trust investment choices for a difficult beneficiary

Post by dbr » Fri Apr 12, 2019 9:11 am

FBN2014 wrote:
Thu Apr 11, 2019 9:24 pm


You are absolutely correct, he wants the principle which I guarantee based on his past history would be gone in a few years. Then he would try to sue me claiming that I should never have given him the money knowing he would squander it since he is financially illiterate.
Indeed, classic "Beyond the Grave." What a situation. Worse yet he could probably even configure a superficially valid case that you are hoarding the money and cutting him short. 3% is an ultraconservative withdrawal rate intended to protect longevity to a point where chances of still being alive are minimal. Also is that 3% an inflation adjusted fraction of initial portfolio, is it a fixed sum, or is it 3% of the standing portfolio value every year. I still can't reconcile your dollar figures because if I were the beneficiary and heard my income could go from $20K to $58K I would sure think your management of the estate is off base even though converting everything to a fixed annuity would not be recommended financially.

Seriously, the only escape appears to be for you to resign. I don't think a winning option exists for you.

GmanJeff
Posts: 356
Joined: Sun Jun 11, 2017 7:12 am

Re: Trust investment choices for a difficult beneficiary

Post by GmanJeff » Fri Apr 12, 2019 9:33 am

Check before assuming Vanguard National Trust Company or other trust company will not accept this trust for management. If they will, resignation may in fact be a practical way for you to extricate yourself from your unwanted and stressful duties as Trustee.

You can resign regardless, although you may wish to seek legal counsel regarding the mechanics and implications for you in the state having jurisdiction. You cannot be obliged to continue to serve against your will. The trust's terms surely speak to the appointment of a successor trustee in the event of the resignation or disability of the initial trustee. Your personal inability to identify a successor trustee will not keep you from resigning, but you may need to obtain a court order in lieu of simply abandoning your role.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Fri Apr 12, 2019 9:56 am

dbr wrote:
Fri Apr 12, 2019 9:11 am
FBN2014 wrote:
Thu Apr 11, 2019 9:24 pm


You are absolutely correct, he wants the principle which I guarantee based on his past history would be gone in a few years. Then he would try to sue me claiming that I should never have given him the money knowing he would squander it since he is financially illiterate.
Indeed, classic "Beyond the Grave." What a situation. Worse yet he could probably even configure a superficially valid case that you are hoarding the money and cutting him short. 3% is an ultraconservative withdrawal rate intended to protect longevity to a point where chances of still being alive are minimal. Also is that 3% an inflation adjusted fraction of initial portfolio, is it a fixed sum, or is it 3% of the standing portfolio value every year. I still can't reconcile your dollar figures because if I were the beneficiary and heard my income could go from $20K to $58K I would sure think your management of the estate is off base even though converting everything to a fixed annuity would not be recommended financially.

Seriously, the only escape appears to be for you to resign. I don't think a winning option exists for you.
I realize that posters misunderstood my original post. The amount he is receiving is about $38,000/year. With the SPIA it would increase by $20,000 to $58,000/year. I corrected the original post to clarify.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

bsteiner
Posts: 3860
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Trust investment choices for a difficult beneficiary

Post by bsteiner » Fri Apr 12, 2019 9:59 am

dbr wrote:
Fri Apr 12, 2019 9:11 am
... 3% is an ultraconservative withdrawal rate intended to protect longevity to a point where chances of still being alive are minimal. ....
The 4% rule is intended to make sure that the principal is unlikely to run out during a retiree's lifetime. It doesn't take into account the next generation.

3% is likely to preserve the real value for future generations.

What's appropriate depends on all of the facts and circumstances.

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Fri Apr 12, 2019 10:15 am

bsteiner wrote:
Fri Apr 12, 2019 9:59 am
dbr wrote:
Fri Apr 12, 2019 9:11 am
... 3% is an ultraconservative withdrawal rate intended to protect longevity to a point where chances of still being alive are minimal. ....
The 4% rule is intended to make sure that the principal is unlikely to run out during a retiree's lifetime. It doesn't take into account the next generation.

3% is likely to preserve the real value for future generations.

What's appropriate depends on all of the facts and circumstances.
The fiduciary CFP that I employ suggested the withdrawal rate of 3-4% would be sustainable for the beneficiary's life expectancy. He ran a Monte Carlo simulation for various asset allocations which showed the probability of success. I settled on a 40/60 allocation of index funds with a probability of sustaining the portfolio for 35 years at about 80% at a withdrawal rate of 3.5%.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

Topic Author
FBN2014
Posts: 589
Joined: Sat Mar 08, 2014 3:07 pm

Re: Trust investment choices for a difficult beneficiary

Post by FBN2014 » Fri Apr 12, 2019 10:31 am

dbr wrote:
Thu Apr 11, 2019 7:35 pm
I am having trouble reconciling 3% withdrawal being $20,000 and less than 6% being $58,000.
I realized my original post was confusing. I meant to say that the payout would increase by $20,000 from $38,000 to $58,000.
"October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May March, June, December, August and February." - M. Twain

afan
Posts: 4058
Joined: Sun Jul 25, 2010 4:01 pm

Re: Trust investment choices for a difficult beneficiary

Post by afan » Fri Apr 12, 2019 10:46 am

Would the annuity be purchased by the trust and held as the only asset of the trust? That is, the insurance company would issue monthly checks to the trust and the trust would then write checks to the beneficiary?
This would keep the future cash flow from the annuity protected within the trust.
Or would the trust buy the annuity, then distribute the annuity to the beneficiary, so that the beneficiary now held it? Then the insurance company would send checks directly to the beneficiary?
It would seem only the latter would get the current trustee completely out of it. This might let the beneficiary do exactly as speculated, use this guaranteed cash flow to borrow more money...

Gill, in your days as a trust officer would you do any due diligence on the beneficiaries before accepting appointment as a trustee? If not, I assume you found yourself with some difficult ones. What did you do?

I am trustee for a beneficiary with a similar inability to manage finances. I had considered hiring a bank or trust company from the start, to protect me from exactly this situation. I was scared off by the costs of a professional trustee. I thought I would do the job myself and bring in a bank if the beneficiary were driving me crazy. I got lucky in that the beneficiary has not been nearly as bad as I had feared. Doing the trustee job myself saves the trust the cost of a professional trustee.

Gill's comments about the refusing to accept appointment is not something I had considered. By not bringing in a bank at the start I created a risk that I might not be able to find a corporate trustee if I wanted one.

If Gill and bsteiner think this sounds promising, I would take the idea to your attorney and dig deeper.
It does seem that the family and the insurance trusts have to be handled differently.
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

User avatar
Kenkat
Posts: 4777
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Trust investment choices for a difficult beneficiary

Post by Kenkat » Fri Apr 12, 2019 10:49 am

This is a very difficult situation, but if you can emotionally stomach it, I would just keep doing exactly what you are doing and do your best to ignore any emails you get. I think you’ve done an admirable (with a capital A) job of managing this money responsibly and in keeping with the overall direction of the trust documents.

There’s a reason this was set up as a trust - the beneficiary is clearly not able to manage money, so to the beneficiary - tough luck, pal, this is what you get. If the beneficiary wants to be angry with someone, go visit the graveyard. But really, both the original grantor and you as trustee were / are clearly operating in the best interest of the beneficiary, whether they like it our not.

I do understand if this is all just too much to deal with and so other options should be considered. I do caution that other options will just lead to more of the same, however.

afan
Posts: 4058
Joined: Sun Jul 25, 2010 4:01 pm

Re: Trust investment choices for a difficult beneficiary

Post by afan » Fri Apr 12, 2019 11:03 am

I would not keep doing it if I had a choice.
Appointing bank trustee, if one would take the job, could still leave the OP stuck if the OP would continue to have the ability to appoint another trustee. Presumably the beneficiary would not be happy with the bank trustee and would try to get the OP to appoint a different one.

Assuming the beneficiary is competent to agree to the annuity plan for the trust for which it would work, this would get the OP out of it for that part.

Recognize that the current plan and the annuity route leave the beneficiary out of luck if their expenses go up later in life. Nursing home, for example. The money distributed will be gone and it could be a real challenge to find a place that would take someone with only this amount in annual income.

That was the other reason I did not go with a professional trustee. With all my shopping I did not find one that had anything useful to say about a distribution plan for a beneficiary who both needs/wants current income and who is likely to need a nursing home in the future. If even one had said "We deal with this all the time. Here is what we do..." Such a company would have been worth the fee.
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

aristotelian
Posts: 5486
Joined: Wed Jan 11, 2017 8:05 pm

Re: Trust investment choices for a difficult beneficiary

Post by aristotelian » Fri Apr 12, 2019 11:13 am

FBN2014 wrote:
Thu Apr 11, 2019 7:59 pm
He does turn 62 this year so he could take SS. Thanks for the good wishes. The only reason I have an advisor was to put a buffer between myself and beneficiary. Even that has not helped really as he blames me for the negative return in the portfolio in 2018 when there was a correction from October through December.
Has he given you credit for January-March? In any case, if you have a difference in risk tolerance, you could do something like Lifestrategy Income (20/80) to reduce exposure to stocks. In his 60's, a conservative allocation might be appropriate for him anyway. Completely changing course to an SPIA might be throwing the baby out with the bath water, especially if you do not feel confident in your ability to assess an annuity contract.

Post Reply