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Old 08-16-2016, 03:48 PM   #21
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Someone is going to eat a bitter pill here. Probably all of you will because all of your boundaries will need to adjust. Give up the 1% and have someone manage the trust. Your sister and mother are going to end up resenting you. It will destroy the family. For $23k a year I'd rather have them hate someone else. Have a 3rd party manage a traditional 4% withdrawal rate and let your mother spend the money as she likes. Stay out of the finances between mother/sister. That relationship is set and likely won't change.
Sorry, if I am a sibling, I'm not sitting back and letting another sibling ruin what my parents (or at least the father) worked to put together. Pissed off sis or not.
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Old 08-16-2016, 04:15 PM   #22
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Sorry, if I am a sibling, I'm not sitting back and letting another sibling ruin what my parents (or at least the father) worked to put together. Pissed off sis or not.
Yes, but unfortunately it appears that what dad built has (inadvertently) ended up being a doomsday device that threatens to blow up the family relationships and, despite being a beefy sum, may not keep Sis from paupering Mom. I don't like annuities in general, but this seems like a good use for one. Now, if the trust is supposed to provide for the general welfare, schooling, vacations, etc of a bunch of other people, then that is a different problem set. But if it is for Mom's needs and only the "emergency" needs of just a few others, then an immediate annuity (with Mom as the annuitant) that meets Mom's spending needs seems like a very good solution. After that is set up, anything left over in the Trust can be used to pay the expenses for the house and then for these "emergencies."
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Old 08-16-2016, 04:26 PM   #23
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Sorry, if I am a sibling, I'm not sitting back and letting another sibling ruin what my parents (or at least the father) worked to put together. Pissed off sis or not.
That is the point of using the 4% withdrawal limit (trinity study that we all use) and stepping aside. You limit what your mother can spend and you also don't have the enmity of your mother and sister. The fortune remains largely intact.
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Old 08-16-2016, 05:12 PM   #24
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Sign me up as another person with a sister who sucks the life out of our family by demanding to be taken care of and refusing to work and take care of herself. I guess a lot of us are in that situation. It's helpful to see I'm not the only one!

I also refuse to give her money, since she is not the slightest bit willing to try and get a job. But I get tremendous pressure from my mother to take care of her. It really sucks the life out of me, but I try to ignore it as best I can.
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Old 08-16-2016, 06:51 PM   #25
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So the trust is not just for your Mom? I presume you and your sister are current beneficiaries? Remainder beneficiaries? Anyone else? If so, this does change things slightly.
Also, the fact that an annuity just in your mom's name was cashed in and routed to the trust is a bit of a change up.

I would consider giving your mother the money that was in her annuity and was titled to her. It was her money. Not the money of the trust. Not sure why it was routed to the life insurance proceeds of this trust but is, what it is. I assumed this trust was set up thru your Dad's will but perhaps not. What triggered the set up of the trust? And when your Mom routed her annuity money to the trust, did she think she would be able to get it at any time?

I also assume there is verbiage in the trust that goes something like ..."for the health, welfare or educational needs of all beneficiaries". Does it include those words? For all beneficiaries?

So..think about...if there was another trustee other than yourself, would he or she distribute the money? Would he or she be bound by the terms of the trust and are those legitimate distributions? Because if so....I am no longer sure you can say no. You can request proof of legitimate expenses prior to distributing or perhaps in conjunction with. And you can warn everyone that distributions may be lower...etc...etc...etc.

And you might consider taking those management fees, set them aside for any future needs for your mom. (1% is higher than allowed by my state).
Dad's trust, Mom's the beneficiary. Once she passes, it then falls through to her children. We are not direct beneficiaries. The annuity was titled to the trust, not her, hence the reason why it went back to the trust. Only thing it states for emergencies and medical. My net worth is higher than the entire trust, so I do not need nor depend on the funds. Should I get incapacitated, then ironically, my sister is the backup trustee. If I wasn't the buffer, the money would be gone. Guaranteed. Both my parents weren't great about money. To be honest, the only one out of all five of us that has a budget and lives within their means, is me. This would be prob. the reason why our Dad placed me as the primary trustee. I didn't ask for this title. I leave the 1% in the trust and invest it into a CD. There are no ulterior motives. I just worry that my Mom will run out of money. My grandmother ran out of money and my Dad had to cover her expenses. It cost him an extra 20k - 30k a year on top of his Mom's pension and SS. 1% is the standard trust management fee in New York. It was put into the trust. Again, I never took it, and just invest it within the trust. Mom also wanted to give 50k to help sis start a business. Again, this is why I am the buffer.

I have no issues with giving up the investments, however, Mom doesn't want that as it will cut her monthly dividend. I've mentioned it several times, and it would cost her around 2k a month in less than she's receiving. It would significantly interfere with her monthly expenses. She'd probably start selling things and resent me anyway. I've offered to destroy the trust and give it all to her to manage. She doesn't trust herself and feels it would not be a wise decision.
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Old 08-16-2016, 06:55 PM   #26
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Someone is going to eat a bitter pill here. Probably all of you will because all of your boundaries will need to adjust. Give up the 1% and have someone manage the trust. Your sister and mother are going to end up resenting you. It will destroy the family. For $23k a year I'd rather have them hate someone else. Have a 3rd party manage a traditional 4% withdrawal rate and let your mother spend the money as she likes. Stay out of the finances between mother/sister. That relationship is set and likely won't change.
Sis already has resent towards me and our older sister as we're "successful" and have relative financial security. Granted, my father setup my older sister, but I went to work for a tech company in CA around 2004 (use your imagination). So, younger sister feels she has to compete or cannot keep up with either one of us. Personally, because I have that much more (no bragging), I feel she has more resentment towards me. I offered to help her get a job in tech., just she doesn't want to study STEM or get a MBA in the sciences. There is little I can do with a Humanities degree in technology. So, again, she feels lost and angry.
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Old 08-16-2016, 06:57 PM   #27
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Yes, but unfortunately it appears that what dad built has (inadvertently) ended up being a doomsday device that threatens to blow up the family relationships and, despite being a beefy sum, may not keep Sis from paupering Mom. I don't like annuities in general, but this seems like a good use for one. Now, if the trust is supposed to provide for the general welfare, schooling, vacations, etc of a bunch of other people, then that is a different problem set. But if it is for Mom's needs and only the "emergency" needs of just a few others, then an immediate annuity (with Mom as the annuitant) that meets Mom's spending needs seems like a very good solution. After that is set up, anything left over in the Trust can be used to pay the expenses for the house and then for these "emergencies."
Mom doesn't want an annuity, as she is concerned if they fail, then she knows she's really up sh!ts creek. She sold a 6% annuity because of that. After fees, it was netting 4%.
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Old 08-16-2016, 06:59 PM   #28
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Not sure if Vanguard does it, but Fidelity will build a custom bond ladder based on the sweet spot in interest rates for $1 a bond commission. That is a deal.
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Old 08-16-2016, 07:00 PM   #29
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That is the point of using the 4% withdrawal limit (trinity study that we all use) and stepping aside. You limit what your mother can spend and you also don't have the enmity of your mother and sister. The fortune remains largely intact.
She's requires more than 4% right now. Of the 2.5, 100k is going to Mom in cash. 400k is in cash. So there is only 2m in bonds and such. 2m x 4% = 80,000. She's pulling out 95,000 + a year with dividends and taxes. The dividends, on average right now, are pulling around 6%. As they come due and reinvested, there will be issues.
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Old 08-16-2016, 07:00 PM   #30
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Sisters

After reading comments about sisters, I realize how blessed I was to have my sister take care of all of mom's needs. She handled her banking, care, and anything that came up. When mom died last year, her trust was set up to give my sister the condo. I had absolutely no resentment. As they said in the commercial, she earned it!
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Old 08-16-2016, 07:01 PM   #31
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Sign me up as another person with a sister who sucks the life out of our family by demanding to be taken care of and refusing to work and take care of herself. I guess a lot of us are in that situation. It's helpful to see I'm not the only one!

I also refuse to give her money, since she is not the slightest bit willing to try and get a job. But I get tremendous pressure from my mother to take care of her. It really sucks the life out of me, but I try to ignore it as best I can.
Kudos. Unless medical or emergency, I do not give money to family.
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Old 08-16-2016, 07:05 PM   #32
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She's requires more than 4% right now. Of the 2.5, 100k is going to Mom in cash. 400k is in cash. So there is only 2m in bonds and such. 2m x 4% = 80,000. She's pulling out 95,000 + a year with dividends and taxes. The dividends, on average right now, are pulling around 6%. As they come due and reinvested, there will be issues.
What kind of a lifestyle does she has that she needs almost $100 K a year?
My wife and I live comfortably on less than $70K
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Old 08-16-2016, 07:08 PM   #33
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I live comfortably on 75k a year as well. I do not go through her spending. The house costs a lot to maintain. She spends a lot on food. She doesn't travel. Long Island is an expensive to live. I do not live there, but it's a waste of money. Most of NY is.
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Old 08-16-2016, 07:19 PM   #34
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Mom doesn't want an annuity, as she is concerned if they fail, then she knows she's really up sh!ts creek. She sold a 6% annuity because of that. After fees, it was netting 4%.
Are you in control or her?

You gave the impression that you are the executor.
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Old 08-16-2016, 07:20 PM   #35
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Somewhat different situation but what we did for BIL's Mom is put all her funds with Vanguard in Wellesley and then set up an automatic distribution to her for her expenses, and BIL and some of his siblings are the beneficiaries of that Vanguard account when his Mom passes on.

Your Mom needs $90k from the trust for her expenses and the property taxes plus she has $13k a year from your Dad's pension so she would have over $100k a year of cash flow. $90k is only 3.75% of $2.4 million and Wellesley distributes close to that each year in dividends and has returned over 7% annually for the last 10, 5, 3 and 1 years. So you could plunk it all in Wellesley, set up a monthly transfer of $6,250 to your Mom's local bank account and then just do periodic transfers as needed for the property taxes.

On the sister thing... your Mom is the beneficiary of the trust and your Dad trusted you to prudently manage the trust for Mom's benefit (not sister's benefit). I think what you can say, legitimately, is that sister is not the beneficiary of the trust and a $100k withdrawal for sister's education is not provided for in the trust and would not be prudent since your Mom may later need the money.

Another option would be to put it all in Wellesley and tell Mom that each year she will the balance at the beginning of the year divided by 100 minus her age ($2,400k/(100-74) = $92k*) and how she spends it is her business but it would not be prudent for you to give her any more and imperil her finances should she live to be very old and that is what your Dad wanted.

* or use the RMD tables if you prefer or just buy the Vanguard Managed Payout fund and Mom gets the ~4% distributions.... take your pick.

As one of the co-trustees of my Dad's trust, I am thankful that all my siblings are financially successful and we don;t have slackers hanging around looking for a handout.
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Old 08-16-2016, 07:31 PM   #36
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I just worry that my Mom will run out of money. My grandmother ran out of money and my Dad had to cover her expenses.

I have no issues with giving up the investments, however, Mom doesn't want that as it will cut her monthly dividend. I've mentioned it several times, and it would cost her around 2k a month in less than she's receiving. It would significantly interfere with her monthly expenses.
What she has been receiving (in the past) is immaterial, as you know. Those safe investments aren't available anymore (which is why you made the OP). The only way you can change the situation and get higher return with the funds in the trust is to take more risk (i.e. higher volatility). How will that sit with Mom if the value of her investments falls and she has to take a cut? And if it happens for years in a row? But if the money were in an annuity her monthly checks would never go down--that's something that you cannot guarantee as long as you manage the investments yourself.

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Mom doesn't want an annuity, as she is concerned if they fail, then she knows she's really up sh!ts creek. She sold a 6% annuity because of that. After fees, it was netting 4%.
Bottom line: You run the trust for her benefit, and your dad did that for a reason. As you say, she doesn't handle money well. Ask her if she knows of cases where an insurance company has failed to pay an annuity in the US. Let her know that you are not a better investor than MetLife, and you sure don't have their reserves.
-- Take a look at what your 74 YO mom could be getting in an inflation protected annuity if you put $2 million into it.
--- If it is more than she would get every month using your investments and withdrawal rate, then why wouldn't you want her to have more every month...guaranteed for as long as she lives? And you are no longer the "bad guy" that she )and you sister need to beg for handouts. Everything is set on autopilot.
--- If it is less than what she would get every month using your investments and withdrawal rate (doubtful), then take a close look at your assumed rate of growth for her investments--is it realistic for the PE10 and bond environment we are in today?
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Old 08-16-2016, 08:13 PM   #37
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Are you in control or her?

You gave the impression that you are the executor.

She was worried about the funds, so I said, if that is what you want, then fine, but your monthly income may be reduced. She understood the ramifications.
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Old 08-16-2016, 08:17 PM   #38
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Somewhat different situation but what we did for BIL's Mom is put all her funds with Vanguard in Wellesley and then set up an automatic distribution to her for her expenses, and BIL and some of his siblings are the beneficiaries of that Vanguard account when his Mom passes on.

Your Mom needs $90k from the trust for her expenses and the property taxes plus she has $13k a year from your Dad's pension so she would have over $100k a year of cash flow. $90k is only 3.75% of $2.4 million and Wellesley distributes close to that each year in dividends and has returned over 7% annually for the last 10, 5, 3 and 1 years. So you could plunk it all in Wellesley, set up a monthly transfer of $6,250 to your Mom's local bank account and then just do periodic transfers as needed for the property taxes.

On the sister thing... your Mom is the beneficiary of the trust and your Dad trusted you to prudently manage the trust for Mom's benefit (not sister's benefit). I think what you can say, legitimately, is that sister is not the beneficiary of the trust and a $100k withdrawal for sister's education is not provided for in the trust and would not be prudent since your Mom may later need the money.

Another option would be to put it all in Wellesley and tell Mom that each year she will the balance at the beginning of the year divided by 100 minus her age ($2,400k/(100-74) = $92k*) and how she spends it is her business but it would not be prudent for you to give her any more and imperil her finances should she live to be very old and that is what your Dad wanted.

* or use the RMD tables if you prefer or just buy the Vanguard Managed Payout fund and Mom gets the ~4% distributions.... take your pick.

As one of the co-trustees of my Dad's trust, I am thankful that all my siblings are financially successful and we don;t have slackers hanging around looking for a handout.


This might work. The account is at Schwab. I assume I can still set this up. Would buying now be an issue due to the higher share price?
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Old 08-16-2016, 08:24 PM   #39
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What she has been receiving (in the past) is immaterial, as you know. Those safe investments aren't available anymore (which is why you made the OP). The only way you can change the situation and get higher return with the funds in the trust is to take more risk (i.e. higher volatility). How will that sit with Mom if the value of her investments falls and she has to take a cut? And if it happens for years in a row? But if the money were in an annuity her monthly checks would never go down--that's something that you cannot guarantee as long as you manage the investments yourself.


Bottom line: You run the trust for her benefit, and your dad did that for a reason. As you say, she doesn't handle money well. Ask her if she knows of cases where an insurance company has failed to pay an annuity in the US. Let her know that you are not a better investor than MetLife, and you sure don't have their reserves.
-- Take a look at what your 74 YO mom could be getting in an inflation protected annuity if you put $2 million into it.
--- If it is more than she would get every month using your investments and withdrawal rate, then why wouldn't you want her to have more every month...guaranteed for as long as she lives?
--- If it is less than what she would get every month using your investments and withdrawal rate (doubtful), then take a close look at your assumed rate of growth for her investments--is it realistic for the PE10 and bond environment we are in today?

One of her genius friends scared the bejesus out of her on annuities and that was why she wanted to sell the annuity. She'll not be able to sleep safe if some of the money is in an annuity.
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Old 08-16-2016, 08:31 PM   #40
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One of her genius friends scared the bejesus out of her on annuities and that was why she wanted to sell the annuity. She'll not be able to sleep safe if some of the money is in an annuity.
You owe it to her and to yourself to show her the figures and explain the situation. If she refuses an annuity (after seeing the bigger check she could get every month, guaranteed by a big company), then at least she can't complain if your investment choices and WR result in cuts to her monthly checks in the future. "Mom, you didn't want the annuity that would have avoided this cut. I told you about the risks."
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