Picking a trustee

T

TwoByFour

Recycles dryer sheets
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May 17, 2014
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I have a question about the trustee. We are in the process of designing a trust for our assets. There are two purposes for the trust: (1) Having someone we trust manage our assets if we are incapacitated, and (2) Upon death, taking care of some relatives through annual stipends rather than a lump sum (we don't think they handle money well), until they die at which time all assets are then distributed to other relatives.

We asked a relative (we have no kids) to be the trustee and she agreed, but a bit reluctantly. We don't want to burden her as she is really busy with her career so we said, in the trust, that she is authorized to hire someone to manage the assets as long as she monitors things.

My question is this: Perhaps we should specify in the trust who or what that money-manager is. So who would that be? A CPA? A lawyer? A brokerage house? I don't want to pay that money manager a percentage of AUM as that will be ridiculous for maybe 20 hours per year of work.

Should that money-manager be a trustee also, or should we have our relative give that person/business access to all the assets so they can make annual distributions?

Advice / recommendations?
 
Maybe specify a fee-based advisor for the investments? As for the distributions, that is not that hard, once the trust accounts are set up. You can also specify the trustee is to take a fee each year, so the trustee person does not feel their time is without some compensation. How you want to do that is up to you, percentage, std fee, etc.



You should have a successor trustee named. That can be another relative, it does not have to be the money manager.
 
Such a trust needs to be professionally written by a specialized trust attorney. When you have recipients of the trust that are not fiscally responsible, a Special Needs Trust often needs to come into play. And they require hard decisions made on front end written simply.

I wouldn't even talk or think about setting up the trust until you speak to an attorney that deals in such matters.

I'm in a situation with a daughter with behavioral issues, her two kids to protect and two older stepchildren, one of which is fiscally irresponsible.
 
Bamaman said:
Such a trust needs to be professionally written by a specialized trust attorney. When you have recipients of the trust that are not fiscally responsible, a Special Needs Trust often needs to come into play. And they require hard decisions made on front end written simply.

I wouldn't even talk or think about setting up the trust until you speak to an attorney that deals in such matters.
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We spoke to an attorney and he will draw it up. But I need to know what I want him to draw up otherwise I am paying him $300/hour to educate me on the options. I am hoping others here have gone through this and can tell me what they did and why.
 
You can define at what age funds are distributed and in what quantity. For instance, my sister's trust (which I am co-executor) is worded so her daughters receive some money only when they are 25.



It also states that her ex-husband has absolutely no claim to the estate. That's what happens when you are a bad person lol.
 
TwoByFour said:
We spoke to an attorney and he will draw it up. But I need to know what I want him to draw up otherwise I am paying him $300/hour to educate me on the options. I am hoping others here have gone through this and can tell me what they did and why.
Click to expand...

I would (actually in the process of revising our estate plan now, attorney charges $495 per hour) pay to make sure you get educated so you can make an informed decision. Otherwise, you are being penny wise and pound foolish IMHO.
 
OP here. This is an update on this topic....

I found out that Schwab does have trust services and I spoke with them this week. They can serve as a successor trustee (they have other trust services also) and will maintain our portfolio, make disbursements, and pay bills as per the instructions in the trust. They do this for a fee of 0.28% of AUM, which is not too bad. The fee does not start until they are activated as the successor. There are some limits on what they will do and the assets must be index funds and simple. I am getting those details from their trust department and will give it to our attorney to put in our trust documents.

So, we will likely name Schwab as the successor trustee and name my niece as the co-trustee. My niece would then be responsible for informing Schwab when they are activated as the successor. She will also keep an eye on things. And sell our house. I would rather pay her the 0.28% but she is just too busy and this would all be new to her.

So, this is the missing piece for us, what I have been trying to figure out. Hope this is helpful to others.
 
TwoByFour said:
OP here. This is an update on this topic....

I found out that Schwab does have trust services and I spoke with them this week. They can serve as a successor trustee (they have other trust services also) and will maintain our portfolio, make disbursements, and pay bills as per the instructions in the trust. They do this for a fee of 0.28% of AUM, which is not too bad. The fee does not start until they are activated as the successor. There are some limits on what they will do and the assets must be index funds and simple. I am getting those details from their trust department and will give it to our attorney to put in our trust documents.

So, we will likely name Schwab as the successor trustee and name my niece as the co-trustee. My niece would then be responsible for informing Schwab when they are activated as the successor. She will also keep an eye on things. And sell our house. I would rather pay her the 0.28% but she is just too busy and this would all be new to her.

So, this is the missing piece for us, what I have been trying to figure out. Hope this is helpful to others.
Click to expand...


I've been struggling with the same issue. I'm single, with no kids, and one smart niece, and one not dependable nephew.

I'm going to be distributing the money in a lump sum, and like you don't want to burden my niece with a lot of work. I also recently talked to Schwab Trust department, I've had a long and almost entirely positive experience with Schwab, and the folks in the Schwab Trust department came across as being competent and honest.

The big issue that I had with them is the only handle financial assets. I'm not sure if the handle non-Schwab assets. In particular, they don't handle real estate, not even your house. This is a deal breaker for me, since I have rental properties in two states, and commercial real estate in Toronto, plus a house.

I also have some really complicated Angel investments, which I fear will be a nightmare to dispose of.

Aside from that this is the issue I still struggle with, and was disappointed that Schwab could help with.

There are two purposes for the trust: (1) Having someone we trust manage our assets if we are incapacitated
Click to expand...

What I really need is somebody to monitor me, and give me nudge that your mind is slipping it is time to let somebody else step in and start handling your financial affairs. Long before I need be put into a facility. Did you find a solution for this issue?
 
clifp said:
What I really need is somebody to monitor me, and give me nudge that your mind is slipping it is time to let somebody else step in and start handling your financial affairs. Long before I need be put into a facility. Did you find a solution for this issue?
Click to expand...

We will be relying on my niece which is far from perfect since she lives 3000 miles away. It is a problem. But I suppose if things don't go off as planned and we are out in la-la land of dementia, I would be ignorant of it all and not really care. But hopefully friends will contact our niece if we are losing it.
 
clifp said:
What I really need is somebody to monitor me, and give me nudge that your mind is slipping it is time to let somebody else step in and start handling your financial affairs. Long before I need be put into a facility. Did you find a solution for this issue?
Click to expand...

A friend of mine is a CPA and she does this for several of her tax clients. She has the contact info for the relative to notify if/when the client no longer seems to be fit to manage things on their own.
 
MBAustin said:
A friend of mine is a CPA and she does this for several of her tax clients. She has the contact info for the relative to notify if/when the client no longer seems to be fit to manage things on their own.
Click to expand...

I can see it now, Apple is going to come out with a new watch for us boomers called the "nitwit" that monitors you for mental decline and sends an alert. :)
 
I am using Schwab trustee services too.

TwoByFour said:
OP here. This is an update on this topic....

I found out that Schwab does have trust services and I spoke with them this week. They can serve as a successor trustee (they have other trust services also) and will maintain our portfolio, make disbursements, and pay bills as per the instructions in the trust. They do this for a fee of 0.28% of AUM, which is not too bad. The fee does not start until they are activated as the successor. There are some limits on what they will do and the assets must be index funds and simple. I am getting those details from their trust department and will give it to our attorney to put in our trust documents.

So, we will likely name Schwab as the successor trustee and name my niece as the co-trustee. My niece would then be responsible for informing Schwab when they are activated as the successor. She will also keep an eye on things. And sell our house. I would rather pay her the 0.28% but she is just too busy and this would all be new to her.

So, this is the missing piece for us, what I have been trying to figure out. Hope this is helpful to others.
Click to expand...

The bold does not make sense to me or I'm not understanding your point. I would think schwab and your niece would both be co-trustees in the case you mention. They both may be successor if they are not the first trustee.

In our trust my older son is 1st successor trustee. He can pull in professional help such as CPA, lawyer, or Schwab. In some cases they can bring in other professional trustees (such as if schwab terminates individual trustee services.
Don't make a novices trustee try to figure it all out without some help. Just don't go broke on the help.
 
0.28% seems like a very low fee. The Vanguard document referenced lists a total fee of 0.3% for assets under 10 million.
 
steelyman said:
0.28% seems like a very low fee. The Vanguard document referenced lists a total fee of 0.3% for assets under 10 million.
Click to expand...
Not the way I read it. For the trustee and investing it is 0.30% between 5MM and 10MM. it is 0.55% from 0 to 5MM
 
bingybear said:
The bold does not make sense to me or I'm not understanding your point. I would think schwab and your niece would both be co-trustees in the case you mention. They both may be successor if they are not the first trustee.

In our trust my older son is 1st successor trustee. He can pull in professional help such as CPA, lawyer, or Schwab. In some cases they can bring in other professional trustees (such as if schwab terminates individual trustee services.
Don't make a novices trustee try to figure it all out without some help. Just don't go broke on the help.
Click to expand...

I want someone who can step in and do short term management and who is authorized to activate the successor trustee. I was thinking that would be a co-trustee. But I will do whatever the lawyer says. Maybe I have the terminology wrong.

Trust value is < 5.0MM. As of today at least.
 
TwoByFour said:
I want someone who can step in and do short term management and who is authorized to activate the successor trustee. I was thinking that would be a co-trustee. But I will do whatever the lawyer says. Maybe I have the terminology wrong.

Trust value is < 5.0MM. As of today at least.
Click to expand...

I'm just SGOTI.
My understanding the successor trustee is a trustee that takes over for a retiring from being trustee. So I have identified trustees that will replace trustees should one no longer be able to perform the position.

If there are multiple trustees, these would be co-trustees.

A trustee that is relinquishing the trustee position can activate the successor trustee as identified in the trust.

If you have a trustee like a friend in the role, he could hire a professional like a CFP to help with doing tasks if the trust allows.

And yes, follow your lawyer's advice... not mine
 
steelyman said:
0.28% seems like a very low fee. The Vanguard document referenced lists a total fee of 0.3% for assets under 10 million.
Click to expand...

Yes, but it sounds like this is a very simple management of the trust. They probably pick some AA like 60/40, put it in their own index funds and let it go. So they make a bit on the ER. They charge extra to manage property (there was an "*", but I didn't see the fine print?).

Then they pay taxes and make distributions per the trust. That's not a lot of work, especially for people who do it every day - routine.

Hmmm, makes you wonder why an FA would ever need to charge more than 0.3%? I guess the 1% is for having to deal with a living person instead of a piece of paper that won't ask questions?


-ERD50
 
clifp said:
I've been struggling with the same issue. I'm single, with no kids, and one smart niece, and one not dependable nephew.

I'm going to be distributing the money in a lump sum, and like you don't want to burden my niece with a lot of work. ....

The big issue that I had with them is the only handle financial assets. I'm not sure if the handle non-Schwab assets. In particular, they don't handle real estate, not even your house. This is a deal breaker for me, since I have rental properties in two states, and commercial real estate in Toronto, plus a house.

I also have some really complicated Angel investments, which I fear will be a nightmare to dispose of.
...
Click to expand...

You probably won't like my suggestion, but for the sake of your niece, I think you should work towards getting out of those tricky assets. Each state, and obviously Toronto, will have different rules/requirements that would be a ton of work for someone unfamiliar with any of this.

Are they really providing income over and above plain-jane investments? And if they are, do you need that income?

If you need a gambling/adrenaline rush, go to the track (you play poker, right? Is that enough)?

-ERD50
 
Pick a smart and HIGHLY TRUSTWORTHY trustee, and a couple back-ups, give them complete discretion. Don't micro-manage from the grave.
 
TwoByFour said:
OP here. This is an update on this topic....

I found out that Schwab does have trust services and I spoke with them this week. They can serve as a successor trustee (they have other trust services also) and will maintain our portfolio, make disbursements, and pay bills as per the instructions in the trust. They do this for a fee of 0.28% of AUM, which is not too bad. The fee does not start until they are activated as the successor. There are some limits on what they will do and the assets must be index funds and simple. I am getting those details from their trust department and will give it to our attorney to put in our trust documents.

So, we will likely name Schwab as the successor trustee and name my niece as the co-trustee. My niece would then be responsible for informing Schwab when they are activated as the successor. She will also keep an eye on things. And sell our house. I would rather pay her the 0.28% but she is just too busy and this would all be new to her.

So, this is the missing piece for us, what I have been trying to figure out. Hope this is helpful to others.
Click to expand...

Thank you as my wife and I are Schwab clients, but have no children. We were wondering how to handle our affairs and this may prove helpful.
 
ERD50 said:
Hmmm, makes you wonder why an FA would ever need to charge more than 0.3%? I guess the 1% is for having to deal with a living person instead of a piece of paper that won't ask questions?


-ERD50
Click to expand...


I think a lot of the heavy lifting is expected to be done before you hand the car keys over to the firm, whether Schwab, Vanguard, or whoever.

Things like making sure taxes are up to date, retitling things appropriately, selling property, getting an EIN, retrieving any unclaimed property, etc. I’m sure there are many complicated stories people can tell.

But once all that is done, the fee structure is probably good for the firm who takes over the remaining tasks.
 
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