need advice on trust thing

[tikitoast]

I don't post much, but read this board avidly. I realize I'm hoping for vindication and justification and approval from y'all, but basically I just need your objective advice.

This whole thing is not really a problem, but I have a tendency to make even little things problematic. Anyhoo, my uncle has been managing a stock portfolio for me for the past 15 years. Now the trust is up (as of today, my 45th birthday), and he has to fork it over to me. I've been walking around in a daze of disappointment because there's even less money in there than there was originally--around 80k in 1992. The money had grown by about 20k in 1999, then the crash happened and I'm down to like 62k now. That's what I'm going to get.

My uncle should really just be a swell guy and cut me a check, but he's not going to do that. He wants me to keep this money in his lousy losing portfolio that's done so brilliantly in the past. Me, I think he's got some bells to be trying to lord it over me this way (he still thinks of me as a kid), particularly when he's shown he's a horrible money manager. I believe he feels bad about the situation, but he's urging me to keep the portfolio in its present configuration and wants me to stay with the same broker (whom I have no reason to trust), so the money can grow for another 15 years.

Wow, I'm thinking, if I keep letting it "grow" the way it's done in the recent past, I won't be able to buy a milkshake with what's left.

So I received a letter today from my uncle's representative, saying I need to give the present broker my social security number. Why?? Apparently they need my info in order to transfer the name on the account to me. I'm assured that they're leaving my uncle's name out, but I think this broker lady is a personal friend of his. My fear is that, when I go to cash out (because I've got my own plans for this cash), she's going to tell on me to my uncle, and then I won't hear the end of it. Because although he's no longer the rep of this trust, he still has my phone number and could make my life unpleasant. He thinks I need his advice on every damn thing. I'd be willing to take it, but he hasn't exactly shown stellar judgment in money matters. Why on earth should I continue to treat him like he's God? I think he's having trouble letting go...

Anyway, I'm going to take some of the cash and retire our debt (credit cards and student loans), and we may use a portion for a down-payment on a house. The rest we may well invest, but I don't care to invest it with my uncle's broker. The portfolio has performed like crap, I'm afraid to lose more, and frankly I have no way of knowing what happened (my uncle won't provide me with the statements).  For all I know this broker is unethical. So I'm going to ask her to cash out my portfolio, but...

I'm scared. I'm terrified of my uncle. It's like something out of Don Giovanni or Mozart's warped childhood with his controlling father. I'm afraid of this guy like I used to be afraid of my dad. What can he do to me? He lives across the country. He's an old guy. He can't kill me for cashing out the portfolio he's clearly emotionally attached to, but I'm nonetheless afraid.

I want to do it secretly. Is it possible? Can I do it in a letter? I'm supposed to communicate with the current broker and give her my social, which I really don't want to do. Should I just call her and do it orally, or document it and put my request in writing? Why am I so nutty and terrified? It's my money. I don't want to be put in a position of having to explain to this broad why I want to cash out my own portfolio, but I'm afraid she's going to give me a hard time. And then tell on me to my uncle. With whom she's probably having an affair.

Okay, I'll stop rambling. I just want somebody to say something that'll make me feel better. Sorry if this wasn't terribly on-topic... Am I worried about nothing here?

 

[Sarah in SC]

Tiki,
The present custodian will be notified when the funds are transferred to a new account. You can do it all with forms at the new brokerage of your choice and they will initiate the transfer. And yeah, she'll probably tell him that you moved it. Try to transfer it in-kind, unless they're such dogs another custodian won't take them--then he won't know that you've sold them. I do these transfers daily with Schwab, but only because of where I work--others are probably cheaper. The transfer will be easy compared to the family nightmare. But move it ASAP, and then he won't know what you are doing with it and you can tell him whatever you like about what it's invested in. Glad you live across the country!
Sarah

 

[wabmester]

$80K in 1992 is $62K now?   Yikes.   Your uncle either invested everything in Japanese stocks, or else that broker is getting some killer trust fees.

In any case, it's a gift from your uncle, and if it were me, I'd respect his wishes.    Once he's gone (or has lost sentience), then I'd transfer the account.

 

[LOL!]

I'm guessing it's not a gift from the uncle, but an inheritance where the uncle was the trustee.

In situations like this, I have always found that the most direct and truthful approach is the best. Go ahead and transfer the money. You will need past statements in order to figure out the cost basis of things that you will end up selling.

Do the transfer and call up your uncle and tell him what you have done and that you need to figure out the cost basis. You might be surprised at the taxes you have to pay as well. To avoid the immediate tax hit, transfer in kind first and make a decision later. Transfer in kind means you don't sell the stocks but transfer the stock shares themselves to the new account.

 

[REWahoo]

In any case, it's a gift from your uncle...

Wab, no it was no gift:

"My father died in 1992 and left about 80K after the sale of his house to be invested by my uncle."
http://early-retirement.org/forums/index.php?topic=6791.msg121683#msg121683

I'm with mclesters and LOL. Tiki needs to transfer the funds as quickly as she can. She can then tell her uncle she has a trusted financial adviser who will help her manage her investments.

 

[bearkeley]

DUDE MAN UP!  

You are 45 years old.  If you are not mature enoug to be in charge of your finances now you never will be.

Kindly thank you uncle for all his help for all these years.  Don't mention the poor performance, lack of trust in the broker or anything else negative.  He probably already feels bad enough about the money and it is water under the bridge anyway.  

Simply explain to him that you need to payoff some debt and want to buy a house and that while you value his advice getting out of debt and owning a home is your priorty right now.  If you deal with your uncle firmly and with respect he should respect you.  If he doesn't that is his problem.

But before you dump your inheritance into paying off your debt you may want to examine the habits that allowed you to collect the debt in the first place.  
The common thead on this board seems to be living below your means and squirreling away money for the future.  Saving money has is far more important than how you pick stocks or manage your portfolio when it comes to having enough money when you reach your retirement age.

If you do decide to invest the money I would listen to those on this board who have done it successfully for many years (not me).  The theme seems to be invest in a diversified group of low cost funds such as vangaurd or a target retirement fund and stay away from high priced brokers.

 

[AltaRed]

Do the transfer and call up your uncle and tell him what you have done and that you need to figure out the cost basis.  You might be surprised at the taxes you have to pay as well.  To avoid the immediate tax hit, transfer in kind first and make a decision later.  Transfer in kind means you don't sell the stocks but transfer the stock shares themselves to the new account.

The broker should also have cost basis of all the investments. My suspicion is that the portfolio was churned a lot to not have grown over time and I suspect there will be little capital gains involved. However, I agree the best thing is to get the account transferred in kind to a new 'brokerage' like ETrade or similar, and then make the decisions on what to sell and when.

 

[tikitoast]

Thank you all for all the great advice.

Transfer in kind--fabulous.

Apparently the trust hasn't earned any income, so hoping there won't be a tax hit...

 

[cute fuzzy bunny]

You might be surprised.

Your portfolio may have made all sorts of money that was squandered on 'fees' and 'transaction costs'.

 

[tikitoast]

Oy.

On another thread someone said I could find out what happened over the lifetime of the trust by requesting tax documentation onfrom the IRS...how much would that tell me?

 

[redoak]

Tiki,

If I understand correctly, the trust was monies left to you by your father's estate?

Money and family dynamics. Enough said.

I agree with bearkeley. Be direct and respectful to your uncle, try to establish a useful dialogue as to your wishes. If that fails keep in mind you now have a right to the control of the trust as specified.

You might want to read the "Millionaire Next Door" there are some great insights in the book especially about transfers of wealth from one generation to another. Good luck.

 

[AltaRed]

Oy.

On another thread someone said I could find out what happened over the lifetime of the trust by requesting  tax documentation onfrom the IRS...how much would that tell me?

You would have to take over ownership of the trust first before IRS would let you in the door. Truth be known, your uncle as trustee would have to have copies of the tax returns and that should be your first move.

Tax returns won't necessarily tell you near as much as broker's statements and transaction slips showing buy and sell, fees subtracted, etc. But certainly, getting the tax returns would help regarding knowing what has been filed in past years and what transaction activity there was. If there was minimal transaction activity, the returns wouldn't tell you much, certainly not the quality of the investments. Many investments could still be considerably 'under water' from the tech bubble burst.

It is possible your uncle, on his broker's advice and/or his own desire, put all the trust's assets into tech stocks and dot.coms back in the late 90's and subsequently lost most/much of it in the bust, but a lot of other people did similar things to their portfolio. Could they be scared they did not appropriately exercise their fudiciary duties in managing the portfolio in the 90's?

I don't understand your reluctance to talk to the current holder (broker) of the trust to facilitate a transfer in kind and then requesting whatever documentation your uncle has from your uncle. There seems to be a lot of 'skating on thin ice' here and a lot of 'avoidance' going on. There is no way to sidestep it until you have the portfolio in your hands.

 

[free4now]

Something to consider:  your inclination to do things behind your uncle's back could be a part of why he doesn't seem inclined to trust you with money.   By being upfront with him about what you are doing you may be able to convince him that you are making a good decision (or maybe not).  If you sneak around you'll almost certainly convince him that you're doing something bad.

It's easy for me to say that not living in your shoes.  But if I was living in your shoes I'd want to see if I could get the Uncle on my side.  You might be able to hide things for a year or more, but eventually it's going to become known to him that you moved the account, and then it'll be even more awkward because you hid it.  It may just be a matter of articulating your plan: giving him the details of how you will save fees and manage risk may be enough to convince him that you know what you are doing.

Since you are considering using the money for a downpayment soon, you probably want to put the money in a safe savings or money market account rather than risking it in equities for now.  So your Uncle should have no problem with the risk level of your investments if you are transparent.

At any rate, give the brokerage your social security number... you'll need the account to be in your name in order to transfer it away.

 

[tikitoast]

Thank you all for this advice.

Good point about staying above-board. There's no reason to fear this guy, it's just irrational. (It's a holdover from childhood when our relationship was much worse than now.)

I feel tons better--so much wisdom on here. Thanks again.

 

[Indexter]

Please keep us posted!

 

[tikitoast]

I will

 

[jclarksnakes]

..It is really none of my business but it seems to me that a much more important issue than the inheritance and how your uncle may or may not have mismanaged it is your irrational fear of him. Life is too valuable to be wasting one moment of it in fear of someone who's only control over you is that control that you let them have.
jc

 

[Martha]

From your previous thread about the trust, it appears that you don't know your uncle very well and don't know if he mismanaged the trust or not. At some point I would consider trying to get historical records for the trust, like tax records, the brokerage company records, and a copy of the trust agreement itself.  To know why the trust performed so poorly may give you some piece of mind.

Or it may just irritate you.   

In any event, your uncle should not be managing the money.  Move it asap.

 

 

[tikitoast]

Martha--I agree with you. I'll pursue it. It's like pulling teeth getting this guy to do anything though.

Life is too valuable to be wasting one moment of it in fear of someone who's only control over you is that control that you let them have.

So true, Jclark. My uncle mistreated me as a child and it's probably inevitable that I'm devasated that he screwed up my money as well. He has had real control over me--or my money, anyway-- for fifteen years. Just hope the fallout from this is brief and easily managed.

I'll try to be brave! Definitely need to take up yoga or something. I'm calm, I'm calm...