Transfer A Vanguard Admiral Fund to Fidelity?

[ERD50]

I'm still helping the family to consolidate my MIL's and deceased FIL's accounts. He had one Vanguard account, which has an Admiral class fund in it (VMRAX), MIL is the trustee, it has been re-titled with the EIN assigned to his trust, so we are good there (I think). We have already opened an account at Fidelity under his trust/EIN, and have transferred some assets there.

I talked to Fidelity, and (as I feared), they can't do an in-kind transfer of an Admiral class stock. What are my options?

A) Sell it and transfer cash? The share price is actually down from the DOD step up basis, so this would likely 'waste' the tax loss. If I'm clear on how this all works, the trust calls for all dividends and distributions to be paid out to my MIL. She would claim them on her personal taxes, so AFAIK, the trust should not have any taxable events? They have a tax guy I can talk to, he did their taxes when they had a business, and they just stayed with him.

B) Can Vanguard 'downgrade' it? I searched this, but everything I saw was about going the other way, or being forced to a downgrade if the value dropped.

C) Wait it out, and sell if/when the share $ is close to the step-up basis? Then transfer the cash? No crystal ball, so this is iffy (cost basis ~ $85/sh, currently ~ $80/sh).


OK, now I see that the Admiral level on this is $50,000, the account is not much higher than that. So if 'B' is not an option, maybe sell just enough to drop to Admiral class to minimize tax G/L, and then transfer as an investor class?

-ERD50

[LOL!]

Call up Vanguard about option B.

I'd sell for a loss. Losses are always good to book. I don't see how the tax loss would be wasted. How do you figure that?

[ERD50]

Quote:

Originally Posted by LOL! Call up Vanguard about option B.

I'll try calling them.

Quote:

I'd sell for a loss. Losses are always good to book. I don't see how the tax loss would be wasted. How do you figure that?

AFAIK, there are no gains in the trust to offset a loss, and there may never be any. All distributions from stocks, etc, are paid to my MIL, and she reports them on her taxes. She can't take a loss from the other trust.

In addition, we plan to do an in-kind transfer of any appreciating assets (well, assets that could appreciate anyway) to my MIL. It is unlikely that she will ever need to sell these, her SS and dividends and pensions cover her living expenses for now. Assuming that's the case, those assets got a step-up in basis at his death, and they will receive another step-up in basis to the beneficiaries at the time of my MIL's demise.

So, if my understanding of tax code is correct, the loss would never be harvested in my FIL's trust. We could possibly harvest the loss to offset dividend income for my MIL.

-ERD50

[nwsteve]

No sweat to get Vanguard to "downgrade" Admiral to Investor and make the transfer.
I moved a "chunk" of Vanguard funds when they ticked me off one time too many and Fido offered 2500 to make the move.
Just request any Admiral positions be transfer to Investor class. Give Vanguard a day to complete and then hve Fido make the transfer
Nwsteve

[ERD50]

Quote:

Originally Posted by nwsteve No sweat to get Vanguard to "downgrade" Admiral to Investor and make the transfer. I moved a "chunk" of Vanguard funds when they ticked me off one time too many and Fido offered 2500 to make the move. Just request any Admiral positions be transfer to Investor class. Give Vanguard a day to complete and then hve Fido make the transfer Nwsteve

Thanks! I'll definitely call then.

-ERD50

[Sunset]

So are you really really sure he only had one Vanguard account ?

I ask because I'm going to soon open an Vanguard account with just over 50K , so that my vanguard business 401K account is not charged $20 per fund per year.

So maybe he has a sep/solo401K/etc account.

Vanguard reps in charge of normal personal accounts, cannot deal with the business accounts, probably because they give faulty info (in my experience).
It would be under a business EIN (not his SSN).

[ERD50]

Quote:

Originally Posted by Sunset So are you really really sure he only had one Vanguard account ? I ask because I'm going to soon open an Vanguard account with just over 50K , so that my vanguard business 401K account is not charged $20 per fund per year. So maybe he has a sep/solo401K/etc account. Vanguard reps in charge of normal personal accounts, cannot deal with the business accounts, probably because they give faulty info (in my experience). It would be under a business EIN (not his SSN).

Yes, they were good at keeping records like that. Just one account at Vanguard. My MIL is now legally blind, but she's pretty sharp yet, and has a pretty good memory for these things.

They closed up the business in the early 90's, I haven't seen any business accounts. But thanks for mentioning it, it could have been a possibility.

I plan to call Vanguard Monday with her, so we'll see how it goes.

-ERD50

[MRG]

Quote:

Originally Posted by Sunset ...snip... Vanguard reps in charge of normal personal accounts, cannot deal with the business accounts, probably because they give faulty info (in my experience). It would be under a business EIN (not his SSN).

Personal and business accounts are two separate lines of business. Supported by with two different groups of people that service those accounts. The j*bs are similar but different, with different knowledge sets, systems they use, processes.... I don't think that's unique to Vanguard, you might find that same split in any fund company.

[panacea]

Quote:

Originally Posted by nwsteve No sweat to get Vanguard to "downgrade" Admiral to Investor and make the transfer. I moved a "chunk" of Vanguard funds when they ticked me off one time too many and Fido offered 2500 to make the move. Just request any Admiral positions be transfer to Investor class. Give Vanguard a day to complete and then hve Fido make the transfer Nwsteve

For clarification, once the investor class fund transfers you can upgrade it back to Admiral shares. Pretty slick.

[nwsteve]

Quote:

Originally Posted by panacea For clarification, once the investor class fund transfers you can upgrade it back to Admiral shares. Pretty slick.

Uhmm, hope this is true. I was told by Fidelity that Vanguard does not let them hold Admiral accounts--Vanguard considers it a proprietary offering.
Nwsteve

[panacea]

Quote:

Originally Posted by nwsteve Uhmm, hope this is true. I was told by Fidelity that Vanguard does not let them hold Admiral accounts--Vanguard considers it a proprietary offering. Nwsteve

Maybe their stance has changed on this?? Not sure, but it's worth checking out for sure.

[ERD50]

Quote:

Originally Posted by nwsteve Uhmm, hope this is true. I was told by Fidelity that Vanguard does not let them hold Admiral accounts--Vanguard considers it a proprietary offering. Nwsteve

That's what I was told by Fidelity as well (just a few days ago). I'll ask again once it is transferred, but I expect that it is not allowed. In fact, as a test, online I tried to buy the Admiral class with $50,000, and the final step said it was not available for purchase in Fido accounts. When I tried with the investor class, it would have allowed it to go through.

Good news, It just so happened we visited MIL today, and I didn't know if we could do this on a Saturday, but I called Vanguard with her on the line, and as soon as I started describing the situation, the rep interrupted and said, then you want us to downgrade this to investor class, right? Yep, so that should be done at the close on Monday.

One step closer to consolidation.

Quote:

Originally Posted by panacea For clarification, once the investor class fund transfers you can upgrade it back to Admiral shares. Pretty slick.

panacea, have you actually done this yourself? First hand knowledge?


-ERD50

[samclem]

Another approach (too late for ERD50, but might be useful to somebody else): The Admiral shares can be converted at zero cost to the analogous ETF, then the ETF shares could be transferred to another brokerage.
More on the process is at the Bogleheads Wiki here. A snippet:

Quote:

Vanguard ETFs are structured as another share class of a mutual fund, like Admiral or Investor shares. This is a process unique to Vanguard, protected by a patent until 2023, with two important consequences for the mutual fund investor: Tax efficiency: the mutual fund shares benefit from the disposition of capital gains through ETF shares, making Vanguard funds with ETF share classes as efficient as an ETF. Conversion: mutual fund shares can be converted to ETF shares without a taxable event. This helps when transferring assets to another broker, including charitable donations. Conversion in the other direction is not possible.

I'm not sure if this would have let you salvage the tax loss.

[ERD50]

Quote:

Originally Posted by samclem Another approach (too late for ERD50, but might be useful to somebody else): The Admiral shares can be converted at zero cost to the analogous ETF, then the ETF shares could be transferred to another brokerage. More on the process is at the Bogleheads Wiki here. A snippet: [/LIST] I'm not sure if this would have let you salvage the tax loss.

Very interesting, but I checked, and the fund they are in does not have an ETF equivalent.

But this could be an option for others. Isn't it something how many complexities and consequences there are, to something that could be so simple (tax rules)?

-ERD50

[panacea]

Quote:

Originally Posted by ERD50 panacea, have you actually done this yourself? First hand knowledge? -ERD50

NO, but I have a client who moved assets from Vanguard to Fidelity and wasn't happy about losing her Adm shares. I told her I was pretty sure there was no way around it and she called me back in a couple weeks saying that she was able to convert it back to Adm shares no problem. I was really surprised.

[Gill]

Quote:

Originally Posted by ERD50 So, if my understanding of tax code is correct, the loss would never be harvested in my FIL's trust. We could possibly harvest the loss to offset dividend income for my MIL.

The loss would be distributed out to the remaindermen on termination of the trust if never utilized in the trust.
Bruce

[ERD50]

Quote:

Originally Posted by MBMiner The loss would be distributed out to the remaindermen on termination of the trust if never utilized in the trust. Bruce

Thanks, I didn't think about that. I guess I was focused on step-up basis at death, but this trust would be in existence after death, so has it's own gains/losses. Still seems easier to avoid the issue, if convenient.

-ERD50