Trustee Fees -- Options

[pedorrero]

I've posted before about this topic, also on Fool. This is a x-post of one I posed in TMF.

http://boards.fool.com/Message.asp?m...6470&post=true

I thought I'd put this issue to rest, but no! The Mommy Trust, or more precisely, the Trustee (BTATS = Bank that ate the South, name changed to protect the guilty) recently sent a letter basically trying to negotiate a newer, higher fee schedule. The trust officer had told me earlier of such a possibility, but this was the first written communique.

SO, to further entertain you, and heck, it might even be applicable somehow in your life, read on.

My options are at least these:

1. BTATS is managing the Trust at a loss (boo-hoo!). They'd like me to agree to a new "reasonable" schedule. Perhaps, but not too quickly...

It still annoys me that the law (apparently) allows them to even consider doing this. It amounts to over-riding one of the terms of the trust document, which to me seems like violating the terms of a contract. However, an attorney I spoke with says that, yes, it is commonly done, and the court usually approves such a request if the fees are "reasonable."

2. I can search for a different Trustee (must be a Bank) to manage the trust, no guarantee it'd be at the cheap rate; apparently they would want a rate hike too.

3. BTATS would have to go to court to ask the authority to charge the higher fees. And, it turns out some earlier poster here was right, that in such a case, the legal fees would come out of the Mommy Trust, or so said the Officer.

Other options:

1. Ask for the trust to be terminated (and all the loot goes to me). I've tried this. THe Officer's answer was "no way"; according to BTATS, that would open them to risk of lawsuits by potential beneficiaries or even me. The Attorney poo-pooed this idea, so it's unclear which is true. In any case, I checked the fine print and BTATS gets a 1% of assets, $2500 min., fee for terminating or transferring the account. So they have no incentive to disburse to me.
In fact that is a worry: that they'll drop the business, and collect an extra 1% of fees, and I'm stuck with some new Trustee possibly assigned by a court, and at a higher ("Reasonable" of course!) fee! Jeez, what a racket! [Memo to parents: your child can have a bright place being one of the Wise, or a trust attorney!]

2. Shop for a new Trustee. This was the Attorney's advice, and I'm pursing it. I was surprised that the new Trustee could be out of state.

Hair-brained ideas, but cost nothing to consider:

1. I force the issue into court. After keeping the business for several years, why is the fee schedule suddenly so unrewarding? Have they in fact been keeping the proper fees over the years? I have BTATS admission in writing that they've screwed up the accounting in 2006 and they're making a refund. How many other errors went unchallenged? Perhaps a full audit is in order. Why can the court demand a higher schedule, in clear violation of the intent of the Trust document, yet the other clauses remain binding (e.g. their stingly distribution provisions)? If BTATS is really losing money on the deal, they have the option to terminate the Trust and their problem is solved. (I'm not sure if all trusts have that provision, but Mommy Trust does.)

Sure, litigating would cost both sides a lot of dough, but the potential payoff to me is huge, if I stood a chance.

2. Appeal to GREED. This might be a win-win situation. After all, my intent is to milk the Trust for as much as I can get. BTATS would like to have ongoing business, at a profit presumably. I dont' know if this is possible, but certainly worth asking for: If I can agree to a higher schedule, why can't I agree to a schedule that is more rewarding even that what you've proposed, on the highest side to be considered "reasonable," (say) just one calendar year? If I'm happy with the service, we can renew or re-negotiate for another year. If not, then the old (el cheapo, money losing) fee schedule kicks back in. Left unsaid, at least in the binding (?) written contract, is my pay-off: you'll be more generous in giving me income; might as well give me some say in the investment mix while I'm at it. That would be cool! I've no idea if this is possible, but this costs nothing ask.

Your comments welcome. Thanks.

"Don't give in without a fight" -- Pink Floyd "Hey You"

[wabmester]

We looked at corporate trustees (as the last successor in a trustee chain), and Vanguard seemed like the best choice out there. If you have to go with a bank, BofA seemed reasonable to deal with.

[Texas Proud]

Wow... many things... but yes, I would look at Vanguard and see if they would do it... another is Bank of New York.. they used to undercut us by a lot when I was a corporate trustee...

As for some of your concern (and this is from someone in corporate, not personal, but probably right).... any lawsuit you start, you are paying both sides.... the trustee has a right to pay ALL legal fees out of the trust if they are defending the terms of the trust... even if they lose the case..

Who are the beneficiaries... if you can get them all to agree to terminate the trust, you might have a shot... also, read the section that talks about termination and see if one applies...

As for losing money.. I doubt it... most personal trusts invest in funds (some called Common Trust Funds)... these are like mutual funds that only the trusts can invest... and they take a fee on this money that is HIGH... I only had a couple of trusts that actually lost money... we just kept them as it because it was to much trouble to change... and the amount of extra income was not enough to make or break things...

BTW... I had a boss once that came and told me that I needed to move the money from an account that we got 10 BPs to one that we got 25 BPs... I would have to talk to the company to get approval etc... I said "NO".. if you want to give them a call and tell them.. go ahead.. I will not do it... cause me a bit of problems at the time... but it was the right thinig to do..

[pedorrero]

Thanks for replies so far. As for distributions, I think its 100% at the Trustee discretion. I'm the only current beneficiary, but they have to allow for a potential wife or children, and the remainderman. I doubt the remainderman would approve, but I don't think that is an issue in this case.

I've started the process to get at least a couple competing quotes from potential trustees. My existing manager is not 100% accurate, for example she claimed that Credit Unions wouldn't mange a Trust. Strictly that may be true. However, I found via my existing CU that there is something called Members Trust (Tampa, FL) which is a spin-off of my CU, that does manage money.

I'm getting my options, or at least 3 quotes, as they say. Despite the likely costs, if it comes to a court challenge, I'm going to do so, even if nobody will take my case and I just appear in front of the judge. The odds may be against me, but the costs would likely be relatively small. At a minimum, I could make my case for cheaper fees, and ask the court to distribute, etc.

I find it suspicious that, after operating the account for almost ten years, BTATS suddenly is asking for a fee hike. This is after I started "riding herd" on them about a year ago about fees, distributions, etc. I smell a rat.

Perhaps a suggestion that they terminate and distribute, and no need or a court-ordered audit of prior years, would be all that's needed? : Well, save that for one of the later options, once the more diplomatic ones have been exhausted.

-- Pedorrero, jailhouse lawyer and belligerent benficiary

[clifp]

Pedorrero

How about a compromise. Dear BTATS, if you agree to withdraw your request for a fee increase. I'll agree not only to stop trying to break the trust, but I'll stop badgering you with countless requests.
I'll still be vigilent about making sure you aren't screwing me, but you won't need a full time trust officer to talk to me every couple of days answer my endless requests for information.

That being said as long as you being posting, you've been obsessed anxious to attempt to get around of BTATS some maybe this is just the execuse you need.

[Texas Proud]

Quote:

Originally Posted by pedorrero Thanks for replies so far. As for distributions, I think its 100% at the Trustee discretion. I'm the only current beneficiary, but they have to allow for a potential wife or children, and the remainderman. I doubt the remainderman would approve, but I don't think that is an issue in this case.

If the trust is written that way, you are screwed... and you do say there is a remainderman.... that is the person the trust is set up for... it sounds like you can get funds for 'need' but the trust goes to someone else such as son, cousin, charity etc. etc... what the person who set up the trust wanted was YOU not to have control of the funds.... that is what the court will see and you will not get what you want...

CUs can not do it. It has to be a trust company. There are state requirements for who can be a trustee... if it is a company, such as banks etc.. they have a separate sub that is their trust company...

I doubt that the trust will allow an 'outside' trustee, such as an individual..

PS... if the trustee gives you more than you deserve, they have to worry about the remainderman suing for inproper distributions..

[pedorrero]

I don't want to give the mistaken impression that I whine & bitch at the Trust Officer very much. I've done a lot more in the past year or so, but the actual letters and phone conversations are probably under ten, total.

IN contrast, this forum and Fool have been my sounding board for whining about the Wicked Trust and related problems. Sorry.

I do get some good pointers from the anonymous friends, sometimes. In the present case, I have two attorneys looiking at the Trust and I'll whine at them. I'll certainly consider their advice...

Some more specifics: as I understand it, the Trustee must manage for present and potential beneficiaries. However, every situation is unique. In my case, I am the only current beneficiary. In fact, as I read the document, during my life I'd be the only one. Only at my death would the following (in order) become successor beneficiary: spouse, children, and remainderman. I'm hoping this will strengthen my case, if any. This might strengthen my case (that no existing folks are desperate for the money.) Tricky business, this trust mangaement. For example, they must balance their option of providing for my care and maintenance, even have the option to pay out all the loot to me, yet they must balance this against the needs/potential lawsuits of beneficiaries that either don't exist or don't really need the booty. Weird.

"Out there is a fortune, wating to be had, if you think I'll pass it up,
You're mad -- You've got another thing coming!"
-- Judas Priest

[Texas Proud]

Hey pedorrero...

don't worry about 'whining'... I don't think you are doing it..

So, I take it you do not have a wife and children...

Who is the 'named' remainderman If the first two are not there.. then THAT is the other party..

I can't remember the name of this kind of trust... but think along the lines of a spendthrift trust... it was designed to 'protect' the person from spending all the money on crap they don't need OR to leave the money to a third party, but protect someone else... so, if you had children, then the trust is set up for your children, but it is given the power to 'help' you if you need it for blah, blah blah... (can't remember the exact words as it was over 20 years ago and I am not an attorney... but usually health, maintenance, education etc...)... now, if you do not NEED any of the money, then the trust might not even distribute money to you...

I have never heard on one that has NO remainderman... that is IMO illegal...

So, you have leagal help... they know more than we do (except maybe Martha knows)....

Good luck in your crusade...

[pedorrero]

Without giving away too much privacy: the remainder man of the Mommy Trust is the Town where she lived. She asks it go to parks and recreation or similar. I think the Town could use the loot for anything it wanted (office spitoons, possibly, in that redneck area of the Appalachians.) Otherwise, I think the Trust is fairly normal. "Spendthrift" is not what the layman would first think (to keep the beneficiary from pissing away the money); instead it means the beneficiary can't assign the potential income (borrow against his "credit line.") Mommy Trust is has what they call "sprinkle" provision (usu. for multi beneficiaries) -- Trustee can give out income or principal as he sees fit. In my case, yes it is for "reasonable care and maintenance" or similar wording. Trust could be tight as a gnat's rectum, or loose as (um...) they want, in this case. I could get no loot, or all of it. More typically, a beneficiary might be entitled to net income, or 5% of assets per year, etc.

Anyway, that is all details. My mission is to try to get either all of the loot, or at least increase pay out to me and perhaps minimize expenses, etc. Wish me luck, I'll need it.