Saving a Trust by Adjusting its Asset Allocation

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

Amount in Trust as of July 3 2022: $515,172
Theoretical Maximum Amount owed to Beneficiaries of Trust by termination: $520,000


Background: I have been the Trustee of this irrevocable testamentary Trust for eight months. The testamentary Trust is to provide a maximum of $25,000 a year for up to a maximum of $100,000 for four years of Undergraduate Education for the beneficiaries [the grandchildren]. It is not for graduate education. The amount awarded is fixed at $25,000 a year and can not exceed this or $100,000 in four years. Any remainder after the last grand child has attended college is to be split equally among the three adult children: myself and my two sisters. This remainder interest and the general bull market of middle of last year made me as one new to investing far too aggressive with the Trust's asset allocation. I am well aware of this now. In large part this was due to combination of my own inexperience and an overly aggressive equity/debt asset allocation.

In the next 3-4 years the Trust will face its largest disbursements. I need your advice on how to reposition this trust so that it does not run dry and, if possible, has the required extra for Trust Administration expenses.
I am aware that rebalancing in the middle of a bear market should not be taken lightly. However, it may well be necessary for this trust to make payments to beneficiaries to sell this Trust’s assets [most of whose basis is far below that for which they were purchased: so the tax consequences to the Trust for the funds and shares it holds should be minimal] in order to make the required distributions to the beneficiaries.
*It is also worth noting that at least one of the grandchildren is unlikely to ever attend a four year college and that this would save $100,000. Also: the last grandchild does not attend college until 2032-2036: ten years after the previous beneficiary completes college. This leaves the last $100,000 [and possibly more] available for investment for many years with no disbursements from the Trust.

There is also the possibility of a market turn around – but at some unknown future date

In connection with this it should be noted the Trust’s holdings:
Vanguard Total Stock Market Index [VTSAX] that is currently $216,000 of the Trust has experienced short term loss of $50,000
Vanguard Total International Index [VTIAX] that is currently $100,000 has had short term loss of $25,000
Of the 10 remaining inherited large cap equities in the Trust valued at approximately $100,000 six have experienced losses
Vanguard New Jersey Long-Term Tax-Exempt Bonds that is currently $89,000 has lost $11,000

Note: If there is a way to right this trust before it loses to much more money - I want to hear any and all suggestions. These should include what an appropriate equity/debt ratio should be; whether particular vehicles such as TIPs [or others] might make sense; what Vanguard or other funds might be advisable and any other suggestions as to how to right this ship

in view of my overly aggressive asset allocation with the Trust I am not averse to turning the Trust over to Professional Management. I would also like to seek advice from the attorney who drafted the Trust as to any further actions take with the Trust. My relationships with the parents of the beneficiaries is fine at this time. In order to keep it so, I must have this Trust in a position to be able to meet its obligations. Finally, if needed I am willing to kick in money for the benefit of the beneficiaries.

Breakdown of Amount owed to beneficiaries year by year - the time sequence is critical particularly in the next four years but also note that the last $100,000 is not due until 2032-2036: ten years after the previous beneficiary completes college:
2022 Total due: $95,000
2023: Total of those certain to attend college: $75,000
2023: Total potential exposure including *all possible including those unlikely* to attend College: $125,000
2023: Total expended from Trust to date: $220,000
2024: Total of those certain to attend college: $75,000
2024 Total if *all possible including those unlikely* Attend College: $125,000
2024: Total Expended from Trust to date: $345,000
2025 Total if all possible attended College: $50,000
2025: Total expended from Trust to date: $395,00
2026: Total if all possible attend College: $25,000
*2026: Total expended from Trust to date: $420,000
*2036-2040 Final child to attend college and final expenditures from Trust: $100,000
Total Expended from Trust to date: $520,000
exodusNH
Posts: 10344
Joined: Wed Jan 06, 2021 7:21 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by exodusNH »

Matt212 wrote: Tue Jul 05, 2022 12:24 pm ...

In connection with this it should be noted the Trust’s holdings:
Vanguard Total Stock Market Index [VTSAX] that is currently $216,000 of the Trust has experienced short term loss of $50,000
Vanguard Total International Index [VTIAX] that is currently $100,000 has had short term loss of $25,000
Of the 10 remaining inherited large cap equities in the Trust valued at approximately $100,000 six have experienced losses
Vanguard New Jersey Long-Term Tax-Exempt Bonds that is currently $89,000 has lost $11,000

...
I think it would be helpful to list the assets of the trust as it is right now.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by dbr »

I guess now that the horse is out of the barn a possibility would be individual Treasuries scheduled to match liabilities.

Here are the Treasury nominal yields: https://home.treasury.gov/resource-cent ... nth=202207
SuzBanyan
Posts: 2015
Joined: Thu Jun 02, 2016 11:20 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by SuzBanyan »

What happens if one or more grandchildren does not finish college? Is there a drop dead date where the adult children get whatever is left in the trust even if one or more grandchildren haven’t completed college?

Not to be harsh, but generally you should not invest money in equities that you need in the near term. And most of these trust funds are needed in the near term. The good news is that even if you move everything to cash (high yield savings account) you are likely to be fine as the $95K would likely earn at least $5k in interest over the next 10 years.
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

Exodus NH: The current assets of the Trust:
Vanguard Total Stock Market Index [VTSAX] that is currently $216,000
Vanguard Total International Index [VTIAX] that is currently $100,000
Of the 10 remaining inherited large cap equities in the Trust valued at approximately $100,000
Vanguard New Jersey Long-Term Tax-Exempt Bonds that is currently $89,000

Suzbanyan: If there are any unused monies by any grandchildren in the Trust by the time that the youngest grandchild either completes college or turns age 25 then the remainder of the Trust reverts to the adult children. Note that there are one [likely as developmentally disabled] and another [possible as uninterested] grandchildren who may not complete college
exodusNH
Posts: 10344
Joined: Wed Jan 06, 2021 7:21 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by exodusNH »

Matt212 wrote: Tue Jul 05, 2022 2:42 pm Of the 10 remaining inherited large cap equities in the Trust valued at approximately $100,000
Vanguard New Jersey Long-Term Tax-Exempt Bonds that is currently $89,000
I'm confused as to what is being bundled under "the rest". Are you saying you have 10 large cap individual stocks at a total of $100k and separately the bond fund at $89k? (So, $11k in random stocks?) Or $100k in random stocks and $89k in long-term bonds?
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

Exodus NH: I have about $100K in individual, random stocks- and also -$89k in NJ long term bonds
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Lee_WSP »

I’m having difficulty compiling the data into a coherent asset/liability statement.

Can you post it as a balance sheet with ranges?

Say column 1: assets, column 2: liabilities (range) (say 200k - 500k)

And have totals at the bottom.

I surmise that the trust is effectively bankrupt, but a balance sheet ought to tell us where you’re at.
toddthebod
Posts: 5735
Joined: Wed May 18, 2022 12:42 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by toddthebod »

You have $505,000 in assets and expect to distribute $402,000 in the next four years? Liquidate those investments right now and invest in a money market fund. The remaining $100,000 should go in nominal bonds that mature in 2036.
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by afan »

Any amounts due in the next 10 years should not be in stocks. Sell and put in a CD ladder, Treasury bond ladder or something comparably safe. These would be better than money market fund.

I did not follow your comments about the basis "most of whose basis is far below that for which they were purchased: "

The basis IS the cost for which they were purchased. Are you saying that you have a loss-current value is less than purchase cost? If so, selling will not trigger any taxes and you can deduct part of the losses against ordinary income.

If you have a gain-current value greater than purchase prices, then you will have to pay CG taxes on the sales.

With college costs coming up soon, you still should be out of the market.with what is left after the taxes.

For the costs that will not show up until 2036, you could have SOME of that money in stocks, but I would not go above~30%.

In this situation, it is most important to make sure there will be cash to pay the bills. Gains above that are nice but coming up short is a huge problem.
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
SuzBanyan
Posts: 2015
Joined: Thu Jun 02, 2016 11:20 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by SuzBanyan »

You also need to review the Trust (possibly with legal counsel) to make sure you understand how you should balance the interest of the grandchildren beneficiaries against the interests of the adult children to the remainder when investing the assets. It is possible that the Trust makes it explicit that the grandchildren should be favored, but it is possible this is not clearly stated. Does the Trust say anything about what should happen if there are not sufficient assets to distribute to the grandchildren (particularly the one who is 10 years younger)?

And speaking of the youngest grandchild, does the trust say that the balance is distributed to the adult children when that grandchild turns 25 or is it more general (I.e., when the youngest grandchild turns 25)? What happens if another grandchild is born or adopted?
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

I want to thank afan and toddthebod for providing clarity on the need to get out of the stockmarket and as afan puts it: " Sell and put in a CD ladder, Treasury bond ladder or something comparably safe"

SuzBunyan: thank you for two sets of highly relevant questions. I will carefully review with legal counsel the balancing of the interests of the grandchildren beneficiaries against the interests of the adult children. In answer to your questions the Trust is silent on if not enough money to go around. The balance is distributed to adult children when the youngest grandchild finishes college or turns 25: whatever happens first. Highly unlikely that there will be any more children as we are nearing 60.

Many thanks
toddthebod
Posts: 5735
Joined: Wed May 18, 2022 12:42 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by toddthebod »

afan wrote: Tue Jul 05, 2022 5:03 pm If so, selling will not trigger any taxes and you can deduct part of the losses against ordinary income.
A trust cannot carryout losses to the beneficiaries except in its final year, and I'm having trouble envisioning a situation where this trust has ordinary income.
123
Posts: 10415
Joined: Fri Oct 12, 2012 3:55 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by 123 »

Matt212 wrote: Tue Jul 05, 2022 12:24 pm ...In the next 3-4 years the Trust will face its largest disbursements...
The trust should be positioned with a significant portion of its assets in dollar-good securities, things like US treasuries and CDs. You may want to consider accumulating ibonds (if allowed by the provisions of the trust).
The closest helping hand is at the end of your own arm.
User avatar
celia
Posts: 16774
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Saving a Trust by Adjusting its Asset Allocation

Post by celia »

Matt212 wrote: Tue Jul 05, 2022 2:42 pm Exodus NH: The current assets of the Trust:
Vanguard Total Stock Market Index [VTSAX] that is currently $216,000
Vanguard Total International Index [VTIAX] that is currently $100,000
Of the 10 remaining inherited large cap equities in the Trust valued at approximately $100,000
Vanguard New Jersey Long-Term Tax-Exempt Bonds that is currently $89,000
OP, You've probably noticed that the total here is $505,000, rather than your first-posted current balance.

I think this trust should be run somewhat like a scholarship or grant program. I'm not sure if you are giving the money to the students or their parents or making payments to the college. I recommend paying the college directly for up to $12,500 a semester as this is how a scholarship would pay. (A $1,000 scholarship for a year is split into two payments.) Payments to the college directly also won't interfere with financial aid, should a student need it. I would require each student to email me a copy of their bill before the semester starts and would only pay up to the amount billed by the school or $12,500, whichever is less, assuming this meets the trust's requirements. Take into account what the trust says in the case a student's cost is less than $12,500, such as if they have a scholarship or are attending part time. Saving a copy of the student's bills would be your record that the student was enrolled and attending, should someone question the trust payments in the future.

Matt212 wrote: Tue Jul 05, 2022 12:24 pm Breakdown of Amount owed to beneficiaries year by year - the time sequence is critical particularly in the next four years but also note that the last $100,000 is not due until 2032-2036: ten years after the previous beneficiary completes college:
2022 Total due: $95,000
2023: Total of those certain to attend college: $75,000
2023: Total potential exposure including *all possible including those unlikely* to attend College: $125,000
2023: Total expended from Trust to date: $220,000
2024: Total of those certain to attend college: $75,000
2024 Total if *all possible including those unlikely* Attend College: $125,000
2024: Total Expended from Trust to date: $345,000
2025 Total if all possible attended College: $50,000
2025: Total expended from Trust to date: $395,00
2026: Total if all possible attend College: $25,000
*2026: Total expended from Trust to date: $420,000
*2036-2040 Final child to attend college and final expenditures from Trust: $100,000
Total Expended from Trust to date: $520,000
I found the above difficult to read, since a school year straddles 2 calendar (tax) years. It is also difficult to see how many students are attending at a time. I suggest re-formatting the above to something like this (although I don't think this is accurate):
Image

The outlined boxes represent a calendar year while the two semesters of a school year are next to each other. You can put each student's name at the top of each column instead of a letter. It appears there are 7 grandchildren, (A-G), but I could be wrong.

After you reformat this, I think you will see that your yearly expected cost is not as you posted. For example, we are in the middle of 2022 and the spring semester is over, yet you show $95,000 still to be spent (for Fall 2022?).
Enjoy11
Posts: 117
Joined: Sun Jan 12, 2020 2:46 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Enjoy11 »

You should seriously consider turning over investment decisions and management to a licensed professional. Simply to protect yourself against a claim of breach of fiduciary duty. Let someone else handle this headache, because it’s already a mess. No offense intended, and good luck to you and your family.
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

Many, many thanks to Celia [again] for presenting this coherent framework for administering the Trust
This was most helpful.
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by 8foot7 »

Enjoy11 wrote: Wed Jul 06, 2022 3:43 am You should seriously consider turning over investment decisions and management to a licensed professional. Simply to protect yourself against a claim of breach of fiduciary duty. Let someone else handle this headache, because it’s already a mess. No offense intended, and good luck to you and your family.
I echo this sentiment. Not to put too fine a point on it, but it appears as if you really screwed this up, and depending on the beneficiaries, this could become a real problem for you. The trust needing to distribute 80%+ of its remaining assets in less than five years means that the trust's risk appetite is approaching zero. (To be clear, eight months ago, when you report you became trustee, its risk appetite was also nearly zero; this didn't suddenly change.) You need to keep up with inflation and that's it. I appreciate this was not done out of malice, but first rule when you find yourself in a hole is to stop digging. Stopping the digging, for me at least, would not only be to go to t-bills or something immediately, but also then to hire this out. Good luck, wishing you the best :sharebeer
Last edited by 8foot7 on Wed Jul 06, 2022 7:18 am, edited 1 time in total.
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

Enjoy11 and 8foot7: Please note that turning this Trust over to the management of a licensed professional is very much under active consideration after relevant family members are apprised and advice obtained. Also, per all the posts [for which I am very thankful], the Trust's assets will be going to the most appropriate cash like vehicle in the next few days to meet its obligations
Last edited by Matt212 on Wed Jul 06, 2022 7:42 am, edited 1 time in total.
deikel
Posts: 1616
Joined: Sat Jan 25, 2014 6:13 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by deikel »

I think you are looking at this wrong (in a way)

What the trust is good for (its purpose) is actually pretty irrelevant for the job you have to fullfill as the trustee/executer. If the funds do not allow for the complete fullfillment of the trust - that's not a problem per se (albeit being annoying and since you are a beneficiary of the trust, its personally not great either). Its not your responsibility to fullfill the trusts aim, its 'only' your responsibility to maintain its value as best you can.

But there are rules for how to adjudicate a trust for the executer and trustee. And if there is no clear guidance in the testament (or the set up of the trust) as to how the funds are to be 'invested', then normal legal guidance applies. And that guidance is calling for a very conservative approach to maintain principle as best as possible. Other then explicitly written down by the person in their will/testament, you can argue that a trust should never be in stocks only in safe investments like CDs or such (even though they are not safe and inflation risk is very real)

You are personally liable for the decisions how to handle the trust and it is entirely possible your siblings may sue you for it - so you need to document a conservative approach to handling the funds.

If you have an awesome relation with your siblings, you can poll their opinion and maybe leave the funds as they are and hope for a market recovery, but you are playing with three peoples education here, that seems an incredible gamble. You are one of the three, so no one can argue malice, you will suffer the same if it goes bad, but I think you need to secure what you have, even at the risk of later payments not being possible due to the losses you have incurred so far.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
User avatar
Wiggums
Posts: 7051
Joined: Thu Jan 31, 2019 7:02 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Wiggums »

Matt212 wrote: Wed Jul 06, 2022 7:14 am Enjoy11 and 8foot7: Please note that turning this Trust over to the management of a licensed professional is very much under active consideration after relevant family members are apprised and advice obtained. Also, per all the posts [for which I am very thankful], the Trust's assets will be going to the most appropriate cash like vehicle in the next few days to meet its obligations
When you became trustee, did you make significant changes the investments? Perhaps the trust investments were not appropriate when you took over? The investments should have been very conservative due to the payouts. Not sure when you would have long bonds in this environment.
Last edited by Wiggums on Wed Jul 06, 2022 8:04 am, edited 2 times in total.
"I started with nothing and I still have most of it left."
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by 8foot7 »

Matt212 wrote: Wed Jul 06, 2022 7:14 am Enjoy11 and 8foot7: Please note that turning this Trust over to the management of a licensed professional is very much under active consideration after relevant family members are apprised and advice obtained. Also, per all the posts [for which I am very thankful], the Trust's assets will be going to the most appropriate cash like vehicle in the next few days to meet its obligations
Good to hear, although not sure I'd leave the delegation of management up to a straw poll. Not a lot of upside for you in this anymore, frankly, but plenty more downside if the checks bounce. If it were me, I'd get out of the way on this one regardless of if your siblings at the current time want you to continue managing the assets.
RubyTuesday
Posts: 2241
Joined: Fri Oct 19, 2012 11:24 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by RubyTuesday »

Are the liabilities really all nominal, including those beneficiaries receiving their tuition benefits 14-17 years from now? Even in low inflation times, significant loss of purchasing power results over that time frame, let alone in these high inflation times.

Make sure you really understand the trust’s governing documents.
“Doing nothing is better than being busy doing nothing.” – Lao Tzu
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by afan »

toddthebod wrote: Tue Jul 05, 2022 8:06 pm
afan wrote: Tue Jul 05, 2022 5:03 pm If so, selling will not trigger any taxes and you can deduct part of the losses against ordinary income.
A trust cannot carryout losses to the beneficiaries except in its final year, and I'm having trouble envisioning a situation where this trust has ordinary income.
As an irrevocable trust, it would have its own tax return. Losses can be deducted on that return.

Many trusts have ordinary income. Interest is ordinary income.
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
User avatar
celia
Posts: 16774
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Saving a Trust by Adjusting its Asset Allocation

Post by celia »

8foot7 wrote: Wed Jul 06, 2022 7:08 am You need to keep up with inflation and that's it.
RubyTuesday wrote: Wed Jul 06, 2022 8:08 am …Even in low inflation times, significant loss of purchasing power results over that time frame, let alone in these high inflation times.
Inflation and the annual increasing cost of college are irrelevant for anyone attending where the cost is over $25K. I understand the trust can only pay up to that amount, regardless of the college’s costs. It is the student/family who will have to absorb the cost increase, not the trust.

And if anyone is attending a college that costs less than $25k, they will still have the total paid.
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by 8foot7 »

celia wrote: Thu Jul 07, 2022 3:20 am
8foot7 wrote: Wed Jul 06, 2022 7:08 am You need to keep up with inflation and that's it.
RubyTuesday wrote: Wed Jul 06, 2022 8:08 am …Even in low inflation times, significant loss of purchasing power results over that time frame, let alone in these high inflation times.
Inflation and the annual increasing cost of college are irrelevant for anyone attending where the cost is over $25K. I understand the trust can only pay up to that amount, regardless of the college’s costs. It is the student/family who will have to absorb the cost increase, not the trust.

And if anyone is attending a college that costs less than $25k, they will still have the total paid.
This position ignores scholarships, work study, and any financial aid that may reduce the cost to the student to, under, or near their trust benefit amount, especially for the students OP mentions that aren’t straight shots for college. The position also ignores the interests of the adult beneficiaries down the line. Suggesting inflation is irrelevant is incorrect.
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by afan »

The trust only pays $25k per year per enrolled student. As described, it does not matter what the total cost of attendance may be. For many colleges, that amount would not come close to the cost for a year now. The rest has to come from other sources, even if the trust was large enough to pay the full cost.

The trustee's job is not to cover the full cost of college for any student. Their job is to pay a fixed amount, no matter what happens with inflation.

At the moment, it appears unlikely there will be anything left for the remainderpeople. Whether they receive anything depends on the investment performance of the trust and the number of students who go to college.

It does not depend on inflation.
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
User avatar
8foot7
Posts: 4427
Joined: Mon Jan 05, 2015 6:29 pm

Re: Saving a Trust by Adjusting its Asset Allocation

Post by 8foot7 »

You're both right. OP should just withdraw in cash and put it in a safe somewhere. :oops:
User avatar
celia
Posts: 16774
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Saving a Trust by Adjusting its Asset Allocation

Post by celia »

8foot7 wrote: Thu Jul 07, 2022 6:22 am You're both right. OP should just withdraw in cash and put it in a safe somewhere. :oops:
No, the money should stay in the trust until all grandkids have had a chance to go to college. The trustee could keep it all in a non-interest bearing checking account, and not worry about filing tax returns. Personally, I would at least try to get some interest, but that probably isn’t required. (Actually, I would leave the last $100K invested in the same ratio as now for 5 years or so, if your siblings agree in writing.)

I don’t think this has been mentioned yet, but the trust will likely have to pay someone else if they make the investment decisions. But if OP goes to 80% cash now, there won’t be much investment decisions left to make. So there would be no need to get an investment advisor. (The main benefit of that would be to be able to put the blame elsewhere if something went wrong, but it’s now too late for that. And no blame is needed. OP was trying to do his/her best and have something left for the remaindermen.)
Topic Author
Matt212
Posts: 28
Joined: Wed Sep 01, 2021 8:17 am

Re: Saving a Trust by Adjusting its Asset Allocation

Post by Matt212 »

First I want to thank all who responded to this post - and I am extraordinarily thankful for the Collective Wisdom that is available from the Boglehead community

I want to especially thank Celia whose repeated responses and excellent conceptualization of the Trust's obligations on a Spreadsheet have been put to use and I am now working from it.

The assets of the Trust were turned into cash today and the $400,000 that will be due in the next four years will be placed in a CD ladder or some similar cash like vehicle as almost all those who posted advocated. The last $100,000 for the beneficiary who does not attend college until the mid 2030s will be invested prudently after discussions with a fee only adviser for the next five years or so.

Most importantly, there should be enough funds to cover the Trust's obligations for all beneficiaries after implementing this advice.

Again, I thank all who responded and I am especiallly greatful to Celia.
Post Reply