Big Trust Companies like Bessemer, US Trust etc

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AnnetteLouisan
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Big Trust Companies like Bessemer, US Trust etc

Post by AnnetteLouisan »

I imagine that many Bogleheads could utilize the services of the major trust companies such as Bessemer, US Trust and whomever else. However, perhaps that conflicts with the do-it-yourself, low expense philosophy of John Bogle.

Have you considered using or have you used the services of a trust company, and if so, how was your experience? Are such services complementary or antithetical to the Boglehead credo? Did you become a Boglehead having previously utilized a full service broker, trust company or private wealth management service?

Update: Thank you to everyone who responded! These are great insights. I will try to respond to everyone today or tomorrow. Since this topic doesn’t lend itself to broad personal disclosures, please PM me if you want to discuss my personal situation. In short, my family probably needs some of these services but the portfolio is real estate heavy.

Update 2: if you want to recommend anyone in NYC please DM me.
Last edited by AnnetteLouisan on Tue Sep 21, 2021 4:40 pm, edited 3 times in total.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by bsteiner »

You won’t know. You’ll be dead when it’s time for them to serve as a trustee of the trusts under your Will.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Gill »

AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pmDid you become a Boglehead having previously utilized a full service broker, trust company or private wealth management service?
I never utilized one of these firms other than to once having them named as my personal representative, but I worked for several during a 35 year career in the business. The only comment I will make is there seems to be an undue emphasis on the investment function by Bogleheads whereas these major trust institutions do far more and and perform many other functions for their clients.
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Re: Big Trust Companies like Bessemer, US Trust etc

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As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
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Lee_WSP wrote: Sun Sep 19, 2021 11:47 pm As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
What's the difference compared to the trust services offered by Vanguard or Schwab?
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Re: Big Trust Companies like Bessemer, US Trust etc

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anon_investor wrote: Mon Sep 20, 2021 12:03 am
Lee_WSP wrote: Sun Sep 19, 2021 11:47 pm As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
What's the difference compared to the trust services offered by Vanguard or Schwab?
I don’t know. A few clients have named Vanguard as a trustee in their Wills but none of them has died yet l.

I’ve asked some colleagues and none of them has had any experience with Vanguard as a trustee either.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by cadreamer2015 »

One thing about Vanguard trust services, as I recall, is that they will not manage a trust with real estate assets - only investable financial assets. I don’t know about Schwab.
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Re: Big Trust Companies like Bessemer, US Trust etc

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Lee_WSP wrote: Sun Sep 19, 2021 11:47 pm As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
You will or rather the “trust” will be paying far more than 1% AUM fees unless your “trust” is so so large that the pro-rated scale brings the level down on a graduated schedule.
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Re: Big Trust Companies like Bessemer, US Trust etc

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anon_investor wrote: Mon Sep 20, 2021 12:03 am
Lee_WSP wrote: Sun Sep 19, 2021 11:47 pm As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
What's the difference compared to the trust services offered by Vanguard or Schwab?
I called Fidelity to inquire about their trust services, they claim to offer “full” trust capabilities including administrative, tax preparation and the ability to act as either sole or as a co-trustee as dictated by the terms of the will. If you just went with them for the administrative part only they charged under 1 percent but had a minimum estate amount of $2 million to accept the assignment and they do not manage separate real estate assets like your house, it has to be cash and securities only. The fee gets progressively more expensive, with the “all-in” asset management and trust fees approximately costing 1.26 percent for the first $2 million. Assets have to go over $5 million before the fees start trending down closer to 1 percent but again, you’ll be paying much higher fees from $0 to $5 million.
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Re: Big Trust Companies like Bessemer, US Trust etc

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I’ve come around on 1% per year being almost like an insurance premium, and a relatively cheap one. How many multigenerational trusts have been managed by individuals without generating investment or tax issues, especially with many beneficiaries, not to mention avoided family dynamics problems? I get that the fees are annoying, but a corporate trustee is the best option.

That said, I would not use the firms listed as they are outrageously expensive unless you’re talking $20 million or more.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Andyrunner »

I remember meeting with a college grad who worked for one of these big trusts. You need to have a LOT of money before they even considered taking you on as a client. I'm talking north of $5M excluding real estate.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by anon_investor »

BillWalters wrote: Mon Sep 20, 2021 7:15 am I’ve come around on 1% per year being almost like an insurance premium, and a relatively cheap one. How many multigenerational trusts have been managed by individuals without generating investment or tax issues, especially with many beneficiaries, not to mention avoided family dynamics problems? I get that the fees are annoying, but a corporate trustee is the best option.

That said, I would not use the firms listed as they are outrageously expensive unless you’re talking $20 million or more.
Are there good corporate options for 1% for a portfolio closer to $5M?
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Re: Big Trust Companies like Bessemer, US Trust etc

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AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pm ...such as Bessemer, US Trust...
US Trust ain't the prestigious trust company it once was. It's just another arm of Bank of America, the huge retail bank. I remember a time when their officers referred to their employer at "The Trust Company". No longer. Most of them left soon after US Trust was acquired by Schwab and later Bank of America. I would not even put them in the class you are discussing.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by bsteiner »

anon_investor wrote: Mon Sep 20, 2021 8:58 am ...
Are there good corporate options for 1% for a portfolio closer to $5M?
Almost all of them will take $5 million, including Fiduciary Trust, Wilmington Trust, Glenmede, the middle tier group at JP Morgan (I think the top tier group at JP Morgan begins at $25 million). The only one I can think of with a higher minimum is Bessemer. I'm not sure what Northern Trust's minimum is.
Gill wrote: Mon Sep 20, 2021 9:01 am
AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pm ...such as Bessemer, US Trust...
US Trust ain't the prestigious trust company it once was. It's just another arm of Bank of America, the huge retail bank. I remember a time when their officers referred to their employer at "The Trust Company". No longer. Most of them left soon after US Trust was acquired by Schwab and later Bank of America. I would not even put them in the class you are discussing.
It was when they were acquired by Bank of America that most of them left. At first, they used U.S. Trust as the name for the entire Bank of America trust department, but at some point they dropped the U.S. Trust name and now they use the Bank of America name.
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Re: Big Trust Companies like Bessemer, US Trust etc

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AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pm Have you considered using or have you used the services of a trust company, and if so, how was your experience? Are such services complementary or antithetical to the Boglehead credo?
Hello Annette, this topic is opaque wherever I've looked (on bogleheads, in person, and elsewhere). It seems very few people have actually used a trust company, or are willing to talk about it.

The few reports I've seen suggest that large trust companies invest like "the herd" of professional managers: i.e. higher expense ratios, more complicated holdings, more churn / tax drag, and higher use of "alt" investments, than a boglehead would personally do. What seems unconscionably complex & costly to a boglehead is, like it or not, considered "prudent investing" by the law. (It's so bad that many trustees, it seems, will refuse to invest in something like Buffett's "90% SPY, 10% Treasuries" for fear of being sued for mismanagement.)

One possible alternative is to use an "administrative only" trustee (it seems South Dakota has several firms that specialize in it), that charges a low percent or fixed fee, and does no investment management. You put all assets into an LLC, which is owned by the trust, and you appoint whoever you want to manage the LLC investments.

This thread has replies from some very experienced estate attorneys. If you have time to browse the last few hundred threads they've joined, it is an excellent education on general principles. Alas, there just aren't many "first hand" reports from trust customers that I've found anywhere, and the few that exist on bogleheads are usually from unsatisfied customers.
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Re: Big Trust Companies like Bessemer, US Trust etc

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anon_investor wrote: Mon Sep 20, 2021 12:03 am What's the difference compared to the trust services offered by Vanguard or Schwab?
I think it would be fair to say that the better trust companies can afford to hire better qualified people to staff the organization. Review some of the websites and look at the bios of their officers. You'll see quite a difference.
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Grt2bOutdoors wrote: Mon Sep 20, 2021 6:59 am
Lee_WSP wrote: Sun Sep 19, 2021 11:47 pm As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
You will or rather the “trust” will be paying far more than 1% AUM fees unless your “trust” is so so large that the pro-rated scale brings the level down on a graduated schedule.
That is correct. However, I will either be incapacitated or dead with no one available to do this service for no fee that I would absolutely trust to execute both halves of financial management (both investment and spending). And since my beneficiaries are under legal and maturity related incapacities, I do not have a better option at this point in time.

As such, I will happily pay the fees to know that I and my family will be taken care of and if I leave a sizeable legacy, it will go on for the next generation or two.
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Re: Big Trust Companies like Bessemer, US Trust etc

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anon_investor wrote: Mon Sep 20, 2021 12:03 am
Lee_WSP wrote: Sun Sep 19, 2021 11:47 pm As Bruce said, I'll either be dead or incapacitated, as such I truly don't care too much about the cost so much as I care about what I paid them to do.

Addressing your concern though, 1% AUM may well be usurious when saving money, but it's par for the course if you want a professional to look after your legacy.
What's the difference compared to the trust services offered by Vanguard or Schwab?
Based on their advertisements and published pamphlets, Schwab offers a full or nearly full trustee service whereas Vangard National Trust is limited to managing liquid assets and a set distribution instruction. I am unsure of how they handle discretionary distributions, but IIRC, someone said they called them and it was okay. Due to their more limited service, their fee is likewise quite small. They may or may not act as executor as well.

You should confirm all of this with Vanguard if you are interested in them acting as your trustee as I have not had any direct dealings with them yet.
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Re: Big Trust Companies like Bessemer, US Trust etc

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I‘m glad this topic resonated with people. About ten years ago the NYT had a great detailed piece about the challenges faced by this industry segment: mostly, tech and changing demographics.

As a single person (a huge market btw- single, divorced, widowed men and women), it’s surprising to me how many different trust and planning needs we have from married folks without anyone catering to this segment.
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AnnetteLouisan wrote: Mon Sep 20, 2021 11:36 am I‘m glad this topic resonated with people. About ten years ago the NYT had a great detailed piece about the challenges faced by this industry segment: mostly, tech and changing demographics.

As a single person (a huge market btw- single, divorced, widowed men and women), it’s surprising to me how many different trust and planning needs we have from married folks without anyone catering to this segment.
Some states have licensed professional fiduciaries that will offer many of the same services as the banks and trust companies do. However, such "firms" are typically one or two principal businesses and you run into issues/questions such as: longevity, policies & procedures, oversight, etc. For very small estates which a traditional bank will not deal with, such individuals may make sense, but then again, they may not. They may make the most sense for someone with a small estate who is experiencing declining mental acuity or someone simply unable to take care of their own finances & pay the bills on time due to some issue or another. Or maybe as a co trustee or some small role that doesn't require any or much power.

For larger estates, I find it hard to recommend anything other than a corporate fiduciary if a full service third party trustee is needed.
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Re: Big Trust Companies like Bessemer, US Trust etc

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Bessemer was handling the trust for Britney Spears and dropped her as a client when the bad publicity surrounding her conservatorship started. I've read that $10 million is the minimum at Bessemer for a family trust.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by afan »

Vanguard says that they will not serve as executor.

Accepting that the largest, oldest trust companies are capable of handling circumstances that Vanguard cannot, how often do these come up? If one person had their trust business at, say, Bessemer and another at Vanguard, might both go for many years with the service being identical? That is, Bessemer could do more than V, but there was nothing for either of them to do?

I gather that some of the old companies will now run a passive portfolio, which removes one of the objections. I would be more willing to pay 1% for a portfolio of a handful of index funds than to pay the same amount for active management. I would not pay anyone to actively manage a portfolio if I had any alternatives. I would be too worried that the managers were unaware of the copiously documented problems with active management and therefore unqualified to manage anything. Or perhaps they knew this was the wrong way to go about managing someone's money but did it anyway because they thought they could charge more. Neither would inspire confidence that I would want them anywhere near my money.

It seems that one can only get information about actual costs and services by having time-consuming conversations with the sales people. Which makes shopping tedious.

One could well have an active trust while alive. Something that was passed on by a deceased person, for example. Or hire them to serve as trustee for a trust you create during life. For yourself or for others. I can imagine being able to manage things but not wanting to. Depending on the price and services, it might be worth it.
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Re: Big Trust Companies like Bessemer, US Trust etc

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AnnetteLouisan wrote: Mon Sep 20, 2021 11:36 am I‘m glad this topic resonated with people. About ten years ago the NYT had a great detailed piece about the challenges faced by this industry segment: mostly, tech and changing demographics.

As a single person (a huge market btw- single, divorced, widowed men and women), it’s surprising to me how many different trust and planning needs we have from married folks without anyone catering to this segment.
Another big gap in successor trustee discussions is the role of the successor trustee during the time between the trustee's mental incapacity and death. Everyone's focus is on the fate of their estate upon death, but many people will face years of living existence when someone else will be in charge of their finances and decisions on their board and care. It's one thing to worry about AUM fees and investment strategies, quite another to wonder what nursing home they will choose for you.
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Re: Big Trust Companies like Bessemer, US Trust etc

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afan wrote: Mon Sep 20, 2021 11:57 am Vanguard says that they will not serve as executor.

Accepting that the largest, oldest trust companies are capable of handling circumstances that Vanguard cannot, how often do these come up? If one person had their trust business at, say, Bessemer and another at Vanguard, might both go for many years with the service being identical? That is, Bessemer could do more than V, but there was nothing for either of them to do?
Any closely held business interests, art & other collectibles, real estate, and personal banking and taxation issues are some of the services off the top of my head that a larger trust company would routinely take care of that Vanguard will not.

Vanguard is not the only alternative and is not necessarily inexpensive either.

But if all you want managed is some liquid securities such that a robo advisor can handle it, Vanguard is not a bad choice given their size, history, and fees.
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Re: Big Trust Companies like Bessemer, US Trust etc

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Bessemer says that the minimum "relationship size" is $10,000,000. I assume that means one could have several smaller accounts that totaled 10M.
Bessemer says that they will do bill pay, which could be among the most important services for someone who is incapacitated.

Gill has cautioned against being what your trust company considers a small account. Although Bessemer will take your business at 10M, they may not treat it as particularly important.

Again, I have no idea how often things come up that need attention.

For an elderly person who cannot manage their affairs an entity that will keep the lights on by paying bills could be far more important than how they managed the money. If they agreed to do passive management, then there would be no difference in the performance among different banks.

A Barron's article from years ago said that fees start at 1%. If you want to know more, then you need to contact them.

Anyone know whether they will serve as power of attorney to manage retirement accounts, make Roth conversions if appropriate, and count those assets towards their minimum?
Last edited by afan on Mon Sep 20, 2021 1:18 pm, edited 1 time in total.
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Re: Big Trust Companies like Bessemer, US Trust etc

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Lee_WSP wrote: Mon Sep 20, 2021 12:21 pm
Any closely held business interests, art & other collectibles, real estate, and personal banking and taxation issues are some of the services off the top of my head that a larger trust company would routinely take care of that Vanguard will not.

Vanguard is not the only alternative and is not necessarily inexpensive either.

But if all you want managed is some liquid securities such that a robo advisor can handle it, Vanguard is not a bad choice given their size, history, and fees.
Those would be worth paying 1% to make sure they are handled correctly. If Vanguard will not do this, then it is essentially just serving as investment manager, which V itself will do for 0.3%. I know they will not do bill paying (I asked). I don't know whether it will do anything with taxes other than prepare a trust tax return. I would not trust the CFPs of whom I have asked questions in the past to have anything useful to say about Roth conversions or other details of retirement strategy.
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Re: Big Trust Companies like Bessemer, US Trust etc

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I do not know how reliable the source may be, but this relatively recent article lists much lower fees. Possible it is technically correct but does not include the whole cost.

https://www.thewealthadvisor.com/articl ... t-services
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Re: Big Trust Companies like Bessemer, US Trust etc

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Beneficiary perspective here.

I initially resented the corporate trustee and thought they were a huge waste of money. Over time I’ve come to appreciate their involvement.

A big part of the initial problem was a lack of communication from the prior generation. The executor did a terrible job too, and literal years went by with beneficiaries being left in the dark, which created a lot of unnecessary angst.

At the second generation, it’s worth it to know you have competent people “taking the bullets” from the other beneficiaries - there is basically no chance they’ll always agree on everything. But even more than that, a corporate trustee greatly reduces the chance the money will be squandered or tear the family apart.
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Re: Big Trust Companies like Bessemer, US Trust etc

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afan wrote: Mon Sep 20, 2021 12:58 pm
Lee_WSP wrote: Mon Sep 20, 2021 12:21 pm
Any closely held business interests, art & other collectibles, real estate, and personal banking and taxation issues are some of the services off the top of my head that a larger trust company would routinely take care of that Vanguard will not.

Vanguard is not the only alternative and is not necessarily inexpensive either.

But if all you want managed is some liquid securities such that a robo advisor can handle it, Vanguard is not a bad choice given their size, history, and fees.
Those would be worth paying 1% to make sure they are handled correctly. If Vanguard will not do this, then it is essentially just serving as investment manager, which V itself will do for 0.3%. I know they will not do bill paying (I asked). I don't know whether it will do anything with taxes other than prepare a trust tax return. I would not trust the CFPs of whom I have asked questions in the past to have anything useful to say about Roth conversions or other details of retirement strategy.
I believe the best analogue for vanguard is a money manager who does not necessarily answer to the beneficiary. They'll handle and transfer money and prepare taxes, but aren't going to hold your hand or act as your agent. By your I mean your beneficiary.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by bsteiner »

senex wrote: Mon Sep 20, 2021 10:01 am ...
The few reports I've seen suggest that large trust companies invest like "the herd" of professional managers: i.e. higher expense ratios, more complicated holdings, more churn / tax drag, and higher use of "alt" investments, than a boglehead would personally do. ...
They don't. They may use individual securities for large cap stocks, but they use low cost funds or ETFs for asset classes where it's not practical to diversify with individual securities. If they use other funds, they'll use their own funds, and they'll offset their management fee at the fund level against their trustee's commissions (fees). They may trade more than people here would, but they don't churn. They won't use alternative investments unless the family wants that.
Lee_WSP wrote: Mon Sep 20, 2021 11:43 am ...
Some states have licensed professional fiduciaries that will offer many of the same services as the banks and trust companies do. However, such "firms" are typically one or two principal businesses and you run into issues/questions such as: longevity, policies & procedures, oversight, etc. For very small estates which a traditional bank will not deal with, such individuals may make sense, but then again, they may not. ...
I think that's a California thing. It could be well suited for trusts that are too small for a bank or trust company and where there's no one among friends and family or the lawyer or accountant who's suitable and who's willing to do it.
Ranunculus wrote: Mon Sep 20, 2021 12:12 pm ...
Another big gap in successor trustee discussions is the role of the successor trustee during the time between the trustee's mental incapacity and death. ...
Most individual trustees will resign when they're no longer able to serve. Most Wills and trusts in the last 25 years give someone the power to remove and replace trustees. There are cases where the initial trustees are individuals but at some point there are no suitable individuals, and a bank or trust company takes over.
afan wrote: Mon Sep 20, 2021 12:25 pm Bessemer says that the minimum "relationship size" is $10,000,000. I assume that means one could have several smaller accounts that totaled 10M.

Gill has cautioned against being what your trust company considers a small account. Although Bessemer will take your business at 10M, they may not treat it as particularly important.
...
Most banks and trust companies will aggregate trusts within a family for purposes of their minimum size requirements.

$10 million is sufficient to be important even at Bessemer.
afan wrote: Mon Sep 20, 2021 1:15 pm I do not know how reliable the source may be, but this relatively recent article lists much lower fees. Possible it is technically correct but does not include the whole cost.

https://www.thewealthadvisor.com/articl ... t-services
That's for trusts where they're not responsible for the investments. There are some trust companies that will serve as administrative trustee for a modest annual fee so long as they're not responsible for the investments (and someone else is).
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Re: Big Trust Companies like Bessemer, US Trust etc

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bsteiner wrote: Mon Sep 20, 2021 1:36 pm
Lee_WSP wrote: Mon Sep 20, 2021 11:43 am ...
Some states have licensed professional fiduciaries that will offer many of the same services as the banks and trust companies do. However, such "firms" are typically one or two principal businesses and you run into issues/questions such as: longevity, policies & procedures, oversight, etc. For very small estates which a traditional bank will not deal with, such individuals may make sense, but then again, they may not. ...
I think that's a California thing. It could be well suited for trusts that are too small for a bank or trust company and where there's no one among friends and family or the lawyer or accountant who's suitable and who's willing to do it.
My state has them, I think one or two other Western states might too. Seems to have spread from California. On paper, it sounds like a good idea, but I do doubt the state puts much effort into providing actual oversight. That said, my largest concern is the longevity of the business when there is only one or two principals. They typically aren’t spring chickens and I gather the majority of their clients are already in nursing homes.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by afan »

Does that include personal finance and bill paying? I.e. everything else that some suggest the big companies are good for, just not investment management?

I could imagine having an heir do the, minimal, work of investment management, but have a trust company do paperwork, pay bills, do tax planning, etc. At 0.4%, or less, it could be worth it. If one really wanted someone to "manage" the portofolio of three index funds, there is Vanguard, or some flat fee advisers who will do it for even less. Might be a good combination.
Or find out what Northern would charge if it did a passive portfolio.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Gill »

afan wrote: Mon Sep 20, 2021 11:57 am It seems that one can only get information about actual costs and services by having time-consuming conversations with the sales people. Which makes shopping tedious.
Unfortunately, in my experience, this is intentional on the part of most trust companies. By keeping their fees opaque they are able they are able to customize fees for the individual client, i.e., cut fees where needed to get the business or increase fees to discourage an undesirable piece of business. You almost never see a fee schedule in the glossy brochures of the big players in the trust business.
Gill
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Lee_WSP »

afan wrote: Mon Sep 20, 2021 1:47 pm Does that include personal finance and bill paying? I.e. everything else that some suggest the big companies are good for, just not investment management?
I'm assuming you're referring to the certified fiduciaries?

Yes. They typically serve as court appointed (or voluntary) guardians or conservators so they will take care of those things. They may not be good at wealth management though. Here's a few services descriptions
Services Provided
Court Appointed Guardian/Conservator, Personal Representative, or Trustee
Contract Agent for persons serving as Guardian/Conservator, Personal Representative or Trustee
Agent under General Power of Attorney
Property Management/Home Inspections
Court Accountings
Personal Bookkeeping
Transportation & Shopping
Relocation Services
Future Nomination as Successor Trustee, Personal Representative, Power of Attorney
Rent or mortgage is paid
Pension income is deposited
Utility bills are paid
Insurance policies are up to date and paid on time
Medical bills are paid
Accounts at brokerages and financial institutions are monitored
Tax returns are filed and taxes are paid
Legal transactions are properly executed
The Fiduciary Licensing Program (FID) is designed to help ensure Arizona's elderly, mentally incapacitated and other vulnerable citizens have licensed individuals or businesses managing their financial affairs, medical decisions and other vital matters.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by afan »

Actually, I was asking about a trust company serving as directed trustee. Trying to learn what services they provide to people who have others managing the investments.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by afan »

Gill wrote: Mon Sep 20, 2021 2:19 pm
afan wrote: Mon Sep 20, 2021 11:57 am It seems that one can only get information about actual costs and services by having time-consuming conversations with the sales people. Which makes shopping tedious.
Unfortunately, in my experience, this is intentional on the part of most trust companies. By keeping their fees opaque they are able they are able to customize fees for the individual client, i.e., cut fees where needed to get the business or increase fees to discourage an undesirable piece of business. You almost never see a fee schedule in the glossy brochures of the big players in the trust business.
Gill
At least that is better than the goal being to force one to listen to a sales pitch. If it is true that the fees are simply negotiable, then I suppose there is on alternative to taking the time.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by afan »

Although the trust division of Bank of American gave up the former US Trust name and lost the people, is it still a company to consider? All the talk about long term continuity would suggest that this should not matter. The Schwab takeover was a long time ago. People will retire or move on. What has been lost in the transition?
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Gill »

afan wrote: Mon Sep 20, 2021 2:48 pm At least that is better than the goal being to force one to listen to a sales pitch. If it is true that the fees are simply negotiable, then I suppose there is on alternative to taking the time.
The fees are certainly negotiable if the trust company wants the business badly enough. One common concession was to split the portfolio, charging the normal fee on the equities but a considerably reduced fee on fixed income holdings. Another was to only charge a modest custody fee on certain assets which the client wished retained or wished to relieve the firm of investment responsibility.

Gill
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Gill »

afan wrote: Mon Sep 20, 2021 2:51 pm Although the trust division of Bank of American gave up the former US Trust name and lost the people, is it still a company to consider? All the talk about long term continuity would suggest that this should not matter. The Schwab takeover was a long time ago. People will retire or move on. What has been lost in the transition?
Good question. When I started in the trust business US Trust was probably the oldest and most prestigious trust company in the business. Now that it is a division of Bank of America, and having experienced multiple public problems over those years, it is just another trust department competing for resources with the rest of the bank services including car loans and mortgages. Maybe it's more in the perception, but I can't help but feel US Trust has been absorbed into this huge retail bank and likely lost in the shuffle.
Gill
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Re: Big Trust Companies like Bessemer, US Trust etc

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senex wrote: Mon Sep 20, 2021 10:01 am
AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pm Have you considered using or have you used the services of a trust company, and if so, how was your experience? Are such services complementary or antithetical to the Boglehead credo?
Hello Annette, this topic is opaque wherever I've looked (on bogleheads, in person, and elsewhere). It seems very few people have actually used a trust company, or are willing to talk about it.

The few reports I've seen suggest that large trust companies invest like "the herd" of professional managers: i.e. higher expense ratios, more complicated holdings, more churn / tax drag, and higher use of "alt" investments, than a boglehead would personally do. What seems unconscionably complex & costly to a boglehead is, like it or not, considered "prudent investing" by the law. (It's so bad that many trustees, it seems, will refuse to invest in something like Buffett's "90% SPY, 10% Treasuries" for fear of being sued for mismanagement.)

One possible alternative is to use an "administrative only" trustee (it seems South Dakota has several firms that specialize in it), that charges a low percent or fixed fee, and does no investment management. You put all assets into an LLC, which is owned by the trust, and you appoint whoever you want to manage the LLC investments.

This thread has replies from some very experienced estate attorneys. If you have time to browse the last few hundred threads they've joined, it is an excellent education on general principles. Alas, there just aren't many "first hand" reports from trust customers that I've found anywhere, and the few that exist on bogleheads are usually from unsatisfied customers.
That‘s very interesting thank you. I will check out the estate attorney posts.
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Re: Big Trust Companies like Bessemer, US Trust etc

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cadreamer2015 wrote: Mon Sep 20, 2021 6:25 am One thing about Vanguard trust services, as I recall, is that they will not manage a trust with real estate assets - only investable financial assets. I don’t know about Schwab.
Are there any who do?
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by AnnetteLouisan »

Lee_WSP wrote: Mon Sep 20, 2021 2:31 pm
afan wrote: Mon Sep 20, 2021 1:47 pm Does that include personal finance and bill paying? I.e. everything else that some suggest the big companies are good for, just not investment management?
I'm assuming you're referring to the certified fiduciaries?

Yes. They typically serve as court appointed (or voluntary) guardians or conservators so they will take care of those things. They may not be good at wealth management though. Here's a few services descriptions
Services Provided
Court Appointed Guardian/Conservator, Personal Representative, or Trustee
Contract Agent for persons serving as Guardian/Conservator, Personal Representative or Trustee
Agent under General Power of Attorney
Property Management/Home Inspections
Court Accountings
Personal Bookkeeping
Transportation & Shopping
Relocation Services
Future Nomination as Successor Trustee, Personal Representative, Power of Attorney
Rent or mortgage is paid
Pension income is deposited
Utility bills are paid
Insurance policies are up to date and paid on time
Medical bills are paid
Accounts at brokerages and financial institutions are monitored
Tax returns are filed and taxes are paid
Legal transactions are properly executed
The Fiduciary Licensing Program (FID) is designed to help ensure Arizona's elderly, mentally incapacitated and other vulnerable citizens have licensed individuals or businesses managing their financial affairs, medical decisions and other vital matters.
This sounds like a dream! Whose services are those?
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by Lee_WSP »

AnnetteLouisan wrote: Tue Sep 21, 2021 8:44 am
Lee_WSP wrote: Mon Sep 20, 2021 2:31 pm
afan wrote: Mon Sep 20, 2021 1:47 pm Does that include personal finance and bill paying? I.e. everything else that some suggest the big companies are good for, just not investment management?
I'm assuming you're referring to the certified fiduciaries?

Yes. They typically serve as court appointed (or voluntary) guardians or conservators so they will take care of those things. They may not be good at wealth management though. Here's a few services descriptions
Services Provided
Court Appointed Guardian/Conservator, Personal Representative, or Trustee
Contract Agent for persons serving as Guardian/Conservator, Personal Representative or Trustee
Agent under General Power of Attorney
Property Management/Home Inspections
Court Accountings
Personal Bookkeeping
Transportation & Shopping
Relocation Services
Future Nomination as Successor Trustee, Personal Representative, Power of Attorney
Rent or mortgage is paid
Pension income is deposited
Utility bills are paid
Insurance policies are up to date and paid on time
Medical bills are paid
Accounts at brokerages and financial institutions are monitored
Tax returns are filed and taxes are paid
Legal transactions are properly executed
The Fiduciary Licensing Program (FID) is designed to help ensure Arizona's elderly, mentally incapacitated and other vulnerable citizens have licensed individuals or businesses managing their financial affairs, medical decisions and other vital matters.
This sounds like a dream! Whose services are those?
Answering your above question, real estate management and any asset management is part of any full service trust company. Vanguard is a limited service company IMO.

Those are services from professional certified fiduciaries who typically serve as court appointed guardians or conservators, but offer trust services as well.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by AnnetteLouisan »

Lee_WSP wrote: Tue Sep 21, 2021 9:26 am
AnnetteLouisan wrote: Tue Sep 21, 2021 8:44 am
Lee_WSP wrote: Mon Sep 20, 2021 2:31 pm
afan wrote: Mon Sep 20, 2021 1:47 pm Does that include personal finance and bill paying? I.e. everything else that some suggest the big companies are good for, just not investment management?
I'm assuming you're referring to the certified fiduciaries?

Yes. They typically serve as court appointed (or voluntary) guardians or conservators so they will take care of those things. They may not be good at wealth management though. Here's a few services descriptions
Services Provided
Court Appointed Guardian/Conservator, Personal Representative, or Trustee
Contract Agent for persons serving as Guardian/Conservator, Personal Representative or Trustee
Agent under General Power of Attorney
Property Management/Home Inspections
Court Accountings
Personal Bookkeeping
Transportation & Shopping
Relocation Services
Future Nomination as Successor Trustee, Personal Representative, Power of Attorney
Rent or mortgage is paid
Pension income is deposited
Utility bills are paid
Insurance policies are up to date and paid on time
Medical bills are paid
Accounts at brokerages and financial institutions are monitored
Tax returns are filed and taxes are paid
Legal transactions are properly executed
The Fiduciary Licensing Program (FID) is designed to help ensure Arizona's elderly, mentally incapacitated and other vulnerable citizens have licensed individuals or businesses managing their financial affairs, medical decisions and other vital matters.
This sounds like a dream! Whose services are those?
Answering your above question, real estate management and any asset management is part of any full service trust company. Vanguard is a limited service company IMO.

Those are services from professional certified fiduciaries who typically serve as court appointed guardians or conservators, but offer trust services as well.
I‘m a junior member of a splintered family that was very frugal and consistent in trying to build a foundation and had some dumb luck, but is aging out of ability to manage. I don’t want the legacy to be lost due to incapable mismanagement. The issue isnt mental incapacity, it‘s just age and complexity exceeds what is realistically achievable on our own.
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by smackboy1 »

I am not an expert. FWIW, I've had past conversations with some of the trust companies mentioned above. Most, if not all, companies will want to have a conversation to gauge the client's service requirement to come up with a proposal. The trust business is bespoke by necessity. Every family's situation is different and no company can be everything to everybody. That being said, I've noticed that some Bogleheads have an obsession of trying to find that unicorn trust company: efficient tax domicile, favorable laws, low expenses, passive investments, no active investments, good management, wise decision making, deep pockets, good reputation, few limitations, etc.. Not easy to find.

The older brand name established companies are one place to look. Even though they are conservative in nature, many have evolved to meet modern demands. For example, directed trusts and delegated trusts is a relatively modern legal creation that was originally limited to a few jurisdictions and a few boutique trust companies operating in those jurisdictions. Nowadays, as states updated their laws to compete for business, many formally traditional trust companies also offer directed and delegated trusts. I would recommend interviewing different firms and not using size or age as a limiting parameter. Bigger and older is not necessarily better. I'm wary of companies that exist to augment their owner's core business; they are often lacking in some aspect e.g. Vanguard National Trust Company, US Trust.

I would work with an experienced lawyer and first figure out which jurisdiction is the most advantageous. Then meeting with trustees in that state. It's possible multiple jurisdictions would be appropriate e.g. holding companies in DE, trustee in SD. The field is actually not that big and a lawyer with many years experience should know the main players at many of the big and small trust companies. A good lawyer should be able to recommend the reputable companies.

What will be the trustee's core function? Will they have to do everything like a traditional trustee, or not? Is it simple or complicated? Just paying bills and filing taxes? Passive investor? Actively running a business? Detente between beneficiaries? Will the trustee be expected to make the difficult decisions, such as saying "no" to a beneficiary? What can be outsourced? Will there be committees made up of beneficiaries or other stakeholders making decisions? Generally the more work the trustee has to perform and the more exposed they are to liability for their decisions, the higher the fees. Hence trustees who manage assets charge % AUM fees. The flip side is that a trustee that only does administrative work and is being directed or is delegating (thereby limiting their insurance premiums) may have a very low fixed fee structure.

OP mentioned real estate. I don't know if that means passive e.g. REITs, or an ongoing real estate rental, buying, selling business. I'm going to assume the latter. One solution is to use 1 trustee to handle everything. Here is a hypothetical example of another solution:

Create a directed trust with a fully discretionary corporate trustee in a favorable jurisdiction i.e. Trustee has complete legal authority to make all decisions, but in most situations will act according to recommendations by various trust committees, such as an Investment Committee. The Investment Committee could be a group of senior family members. The real estate and all other assets would be held in an LLC or other holding entity. The trust would own 100% shares of the holding entity. The actual day to day running of the real estate business could be outsourced to a 3rd party professional real estate management company e.g. Colliers, CBRE, RE/MAX etc.. The market portfolio assets could be managed by another 3rd party e.g. Vanguard, Fidelity, Rick Ferri, etc.. The Investment Committee could choose to be as hands on or hands off as they desire. They can hire/fire the 3rd party managers at will. The Trustee has zero investment responsibility. This structure has the advantage of flexibility. Trustee or investment managers can be hired/fired independent of each other. No need to compromise with a 1 size fits all trust company.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
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Re: Big Trust Companies like Bessemer, US Trust etc

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Gill wrote: Sun Sep 19, 2021 7:51 pm
AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pmDid you become a Boglehead having previously utilized a full service broker, trust company or private wealth management service?
I never utilized one of these firms other than to once having them named as my personal representative, but I worked for several during a 35 year career in the business. The only comment I will make is there seems to be an undue emphasis on the investment function by Bogleheads whereas these major trust institutions do far more and and perform many other functions for their clients.
Gill
Excuse my ignorance, but in what circumstances can one appoint them as ones personal representative? I’d love to have someone handle stuff for me and just keep me updated. 😃
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Re: Big Trust Companies like Bessemer, US Trust etc

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AnnetteLouisan wrote: Thu Sep 23, 2021 4:50 pm
Gill wrote: Sun Sep 19, 2021 7:51 pm
AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pmDid you become a Boglehead having previously utilized a full service broker, trust company or private wealth management service?
I never utilized one of these firms other than to once having them named as my personal representative, but I worked for several during a 35 year career in the business. The only comment I will make is there seems to be an undue emphasis on the investment function by Bogleheads whereas these major trust institutions do far more and and perform many other functions for their clients.
Gill
Excuse my ignorance, but in what circumstances can one appoint them as ones personal representative? I’d love to have someone handle stuff for me and just keep me updated. 😃
As used in this context, a personal representative is the person/entity that handles and closes an estate upon the person's death. Some states use personal representative and others use executor.
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Re: Big Trust Companies like Bessemer, US Trust etc

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Lee_WSP wrote: Thu Sep 23, 2021 4:56 pm
AnnetteLouisan wrote: Thu Sep 23, 2021 4:50 pm
Gill wrote: Sun Sep 19, 2021 7:51 pm
AnnetteLouisan wrote: Sun Sep 19, 2021 7:01 pmDid you become a Boglehead having previously utilized a full service broker, trust company or private wealth management service?
I never utilized one of these firms other than to once having them named as my personal representative, but I worked for several during a 35 year career in the business. The only comment I will make is there seems to be an undue emphasis on the investment function by Bogleheads whereas these major trust institutions do far more and and perform many other functions for their clients.
Gill
Excuse my ignorance, but in what circumstances can one appoint them as ones personal representative? I’d love to have someone handle stuff for me and just keep me updated. 😃
As used in this context, a personal representative is the person/entity that handles and closes an estate upon the person's death. Some states use personal representative and others use executor.
Oh, got it. Thanks.

I can do bill pay and taxes easily myself. I’d likely need a trustee if I became elderly or seriously ill, inherited real estate, lived overseas part of the year, had to pursue proceedings in other jurisdictions, or passed away. I had an affluent elderly cousin twice removed who utilized her CPAs services extensively into her 90s, such as arranging assisted living, handling her investments, artwork, arts patronages, etc. Maybe I need to start w a CPA.

I think my lack of personal connections to these folks is a hindrance, both for me in establishing enough of a comfort level to hire, and for them in terms of understanding my family’s dynamics and needs. My mom is very involved on charitable boards so maybe I need to ask her to identify long term friends of hers with these kinds of connections. The irony is, the hardworking folks in my family haven’t made enough time for many social things but my mom has a rich network of connections through her extensive hobbies and charitable involvement. Illustrating another issue - as a fractured family there is no coordination among most of the members.

Anyone know offhand if an ancillary estate proceeding in another US state must be held if someone in NY has an account at a federal savings bank in another US state, as I do? I’m concerned that one of my banks being out of state would cause a headache for my heirs and no one seems to know the answer. Some say its ok if they have a branch in NY (they do not). Some say since its a federally chartered institution and I reside in NY, no estate proceeding in the other state would be necessary. I was going to close the account but once covid hit, opening a new account seemed not worth being indoors etc to do so

Sorry if I’m asking too many questions- such kind and wicked smart people in one place willing to give their views is a rare find!
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Re: Big Trust Companies like Bessemer, US Trust etc

Post by bsteiner »

AnnetteLouisan wrote: Thu Sep 23, 2021 4:50 pm ... in what circumstances can one appoint them as one's personal representative? ...
You may name any one or more individuals and/or a bank or trust company as your personal representative(s).
AnnetteLouisan wrote: Thu Sep 23, 2021 5:22 pm ...
Anyone know offhand if an ancillary estate proceeding in another US state must be held if someone in NY has an account at a federal savings bank in another US state, as I do? ...
It shouldn't be needed. In many years of doing this, I've only had one case where a bank insisted on this. It was the other way around -- a decedent in another state had an account at a small bank in New York. The court in the county in New York where the account was located wasn't happy to have unnecessary work but nevertheless granted the ancillary probate.
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Re: Big Trust Companies like Bessemer, US Trust etc

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bsteiner wrote: Thu Sep 23, 2021 8:48 pm
AnnetteLouisan wrote: Thu Sep 23, 2021 4:50 pm ... in what circumstances can one appoint them as one's personal representative? ...
You may name any one or more individuals and/or a bank or trust company as your personal representative(s).
AnnetteLouisan wrote: Thu Sep 23, 2021 5:22 pm ...
Anyone know offhand if an ancillary estate proceeding in another US state must be held if someone in NY has an account at a federal savings bank in another US state, as I do? ...
It shouldn't be needed. In many years of doing this, I've only had one case where a bank insisted on this. It was the other way around -- a decedent in another state had an account at a small bank in New York. The court in the county in New York where the account was located wasn't happy to have unnecessary work but nevertheless granted the ancillary probate.
That is good news, thank you! I have probably asked 25 bank employees and other knowledgeable people that question and no one knew for sure.

It’s a bank that pioneered the concept of reimbursing ATM fees other banks charge, and it used to have great service. It was on a Money Magazine list of best US banks back in the 90s, but now its just another bank paying me 0.01 percent.
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