Choosing Estate Trustee - corporate, CPA, lawyer or other?

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Please-FIRE-Me
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Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Please-FIRE-Me »

My Wife and I are establishing the trust / estate plan for our children. We are ~40 with young children. Our net worth is about $3-4M. I understand that corporate trust offices often charge 1-2% of assets per year to manage a trust in the event that my Wife and I are gone - this fee sounds excessive to me if we are not asking them to actively manage investment accounts (i.e. to leave the index funds alone). Another option would be to name our trusted CPA as the executor, or our lawyer - which I believe would be more cost effective.

Anyone have any advice or experience with this?
Gill
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Gill »

Do you expect your lawyer and CPA to outlive the termination of the trust, or be always available, not get sick, have expertise in all aspects of trust administration and be totally objective and impartial? If not, consider a corporate fiduciary.
Gill
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Jack FFR1846 »

This very much interests me. How does one find a corporate someoneorother to be executor/trustee? We're considering not doing trusts because anyone we might want are our age, so could easily be gone before us. We're looking into revolkable trusts that would not be funded until DW and I both pass.
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Gill
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Gill »

Jack FFR1846 wrote: Thu Dec 08, 2022 6:01 pm This very much interests me. How does one find a corporate someoneorother to be executor/trustee? We're considering not doing trusts because anyone we might want are our age, so could easily be gone before us. We're looking into revolkable trusts that would not be funded until DW and I both pass.
That’s why you should consider a corporate trustee. No one individual offers all the attributes of an experienced corporate fiduciary.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
JBTX
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by JBTX »

Our most recent trust we opted for a corporate trustee upon our demise. With special needs and spend thrift children, IRA’s in the trust and taxation, the operation and decisions of the trustee will not be trivial. The approx 1% annual fee will be well worth it. Previously we had designated financially competent relatives but at this point figured the level of complexity involved would not be fair to relatives who were trustees.
afan
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

I suppose you could have a CPA or law firm as trustee. That would give continuity if the person you know were to retire, leave, or die. The other question would be whether they know what they are doing as trustee. You could investigate how much they know about the trustee responsibilities and how to manage the questions that arise. I gather many attorneys who specialize in estates and trusts also serve as trustees. They should know what they are doing. If they are part of large and well established firms with sizeable practices in estates and trusts, then you could assume competence and continuity. You would have to see whether they had the customer relationship software and online access that you might expect from a bank or trust company.

To an extent, it depends on how complicated the work will be. You might find a friend or relative who will do it for free or cheap. You would need to make sure they were reliable.

There are directed trustee arrangements under which the trustee handles the other work but cedes the investment management to someone else. You could hire a professional investment manager to do this job. You may be able to find some who will charge well under 1%. Vanguard PAS charges 0.35% but I do not know whether they will be investment manager for a trust when they are not the trustee. Apparently the trust department will manage investments when they are not trustee. I do not know what they charge. Or you could have a friend or relative "manage" a handful of index funds, while a conventional bank or trust company does the rest of the trustee work.

Vanguard does administer trusts, including investment management. They charge well under 1%, but there are limits on the kind of assets they will manage.
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
Gill
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Gill »

afan wrote: Thu Dec 08, 2022 7:02 pm I suppose you could have a CPA or law firm as trustee. That would give continuity if the person you know were to retire, leave, or die. The other question would be whether they know what they are doing as trustee. You could investigate how much they know about the trustee responsibilities and how to manage the questions that arise. I gather many attorneys who specialize in estates and trusts also serve as trustees. They should know what they are doing. If they are part of large and well established firms with sizeable practices in estates and trusts, then you could assume competence and continuity. You would have to see whether they had the customer relationship software and online access that you might expect from a bank or trust company.
Unless laws have changed in recent years, the only entities authorized to act as personal representatives and trustees are banks and trust companies chartered by the states or Comptroller of the Currency. Law firms, CPA firms or General Motors can’t act in these capacities.
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by bsteiner »

Please-FIRE-Me wrote: Thu Dec 08, 2022 5:28 pm My Wife and I are establishing the trust / estate plan for our children. We are ~40 with young children. Our net worth is about $3-4M. I understand that corporate trust offices often charge 1-2% of assets per year to manage a trust in the event that my Wife and I are gone - this fee sounds excessive to me if we are not asking them to actively manage investment accounts (i.e. to leave the index funds alone). Another option would be to name our trusted CPA as the executor, or our lawyer - which I believe would be more cost effective.

Anyone have any advice or experience with this?
You may be conflating executors and trustees.

Your executors will have the short term job of collecting your assets, paying your debts, taxes and expenses, and distributing what's left to the beneficiaries (in your case, the trusts for your children). Since lawyers are involved in the estate administration, anyone who's responsible and trustworthy and has good judgment should be able to do it. Or you could pick a bank or trust company. The commissions (fees) would be the same either way.

The trustees of your children's trusts will have the long term job of investing the assets and deciding on distributions. A bank or trust company will probably charge about 1% a year, or a little more than 1%, but nowhere near 2%. Vanguard would charge 0.55%. An individual would probably get less than that. In New York, for example, an individual would get $6,900 on the first $1 million and 0.3% above that, so on a $2 million trust (per child) he/she would get $9,900 a year, or about 0.5%. But a lawyer or accountant might not want to take this on. Also, unless the lawyer or accountant knows to invest the way people here invest, he/she might hire someone to invest the assets, at a higher cost than if you picked a bank or trust company.
Jack FFR1846 wrote: Thu Dec 08, 2022 6:01 pm This very much interests me. How does one find a corporate someoneorother to be executor/trustee? We're considering not doing trusts because anyone we might want are our age, so could easily be gone before us. We're looking into revolkable trusts that would not be funded until DW and I both pass.
The lawyer who handles your estate planning should have relationships with several banks and trust companies, and should be able to recommend one or two that would be appropriate for your situation.

Revocable trusts have nothing to do with this. Someone has to adminster your estate regardless of whether it's in a revocable trust, and the trusts for your children (if any) are the same regardless of whether they're in your Will or in a revocable trust.
nyclon
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by nyclon »

I’d suggest speaking with vanguard’s trust services folks. Fees start at 55bps which includes PAS, and scale down to 5bps. They handle a variety of assets including real estate.

https://www.vanguard.com/pdf/a198.pdf

Edit: many posts on BH state that vanguard trust services will not service real estate, private equity or other assets. While this is their standard language, it is NOT true that they are unwilling to do so. They will agree to do so in writing - in fact when I spoke to them they described not only real estate but also some very elaborate asset situations they were dealing with. Maybe it comes down to larger estates where they’ll budge - I’m not sure - but you should speak with them before making the assumption that they won’t address your situation.
Last edited by nyclon on Sun Dec 11, 2022 8:37 pm, edited 1 time in total.
Cruise
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Cruise »

Please-FIRE-Me wrote: Thu Dec 08, 2022 5:28 pm My Wife and I are establishing the trust / estate plan for our children. We are ~40 with young children. Our net worth is about $3-4M. I understand that corporate trust offices often charge 1-2% of assets per year to manage a trust in the event that my Wife and I are gone - this fee sounds excessive to me if we are not asking them to actively manage investment accounts (i.e. to leave the index funds alone). Another option would be to name our trusted CPA as the executor, or our lawyer - which I believe would be more cost effective.

Anyone have any advice or experience with this?
I agree with your trust attorney being the first stop in your journey to find a corporate trustee. A point not mentioned, which was important to us: Having the corporate trustee in your own community (or close). For this reason, the less expensive option of Fidelity would not work for us. We want a relationship with a person who actually knows us (or will get to know us), and will visit us in our retirement community when we are no longer able to drive to their office.
lws
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by lws »

It's best to have a corporate trustee.
Those folks are trained and experienced at executing trusts.
They charge big money because administering a trust is expensive.
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asset_chaos
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by asset_chaos »

For what it's worth we, advised by our estate lawyer, chose co-trustees in considering the trust could become effective when the children were young. One trustee is a relative who's in charge of deciding distributions for the benefit of the children. The relative knows the children, and we expect would make decisions in line with our values. The other trustee is a corporate trustee who's in charge of investments and tax returns and such, the back office activities, if you will. We didn't want the relative to be unduly burdened by paperwork and compliance details. The corporate trustee is also the backup trustee, in case the relative can't or won't continue in the role. Consult your estate lawyer for your specific needs, but it makes sense to me to have a corporate trustee, at minimum, named as a back up trustee. The corporate trustee isn't going anywhere, whereas your trusted individual, to be blunt, can be hit by a bus at any time. We also have what's called a trust protector person that the beneficiaries can petition to change the trustee, if the beneficiaries come to feel the original trustee's not working out for them.

Consider Vanguard's trust department at about a half percent instead of 1-2% fees; although, Vanguard trust won't accept if you have real estate holdings or some of the more exotic investments. But if your estate is more or less Boglehead type of vanilla, they could be a good choice. Again for what it's worth, we chose Vanguard trust as our corporate trustee. As I'm writing this, we don't yet have any direct experience of Vanguard as a trustee. And, as we've nearly got all the children into the adult phase of life, the need we saw for the relative as co-trustee has diminished as well.

Good luck sorting this all out. When everything was finalized, we felt pleased with having the arrangements in place.

Oh, and your first post. Welcome OP to the board.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by HomeStretch »

The chances of both you and spouse passing together while your children are minors is low. So consider focusing on the best Trustee arrangement rather than the fees.

If you don’t have a trusted competent relative to name as Trustee for your minor children’s Trusts, consider a corporate Trustee over a CPA/attorney.

If you use Vanguard, my understanding is that they won’t manage real estate. So your family home will need to be sold by the Executor of your Wills while settling your Estate or you may need to have some separate arrangement for the house if you want the children and their Guardian named in your Wills to continue living there.

You can set up the Trusts such that your children upon or after reaching the age of majority can become co-Trustee and have the power of appointment for the other co-Trustee of their individual Trust. This gives them some protection as well as the ability to re-evaluate the corporate Trustee if fees become too high.
Please-FIRE-Me wrote: Thu Dec 08, 2022 5:28 pm … this fee sounds excessive to me if we are not asking them to actively manage investment accounts (i.e. to leave the index funds alone). …
I don’t believe you get to tell the Trustee to not actively manage investment accounts or to leave your current investments alone.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

Gill wrote: Thu Dec 08, 2022 7:35 pm
afan wrote: Thu Dec 08, 2022 7:02 pm I suppose you could have a CPA or law firm as trustee. That would give continuity if the person you know were to retire, leave, or die. The other question would be whether they know what they are doing as trustee. You could investigate how much they know about the trustee responsibilities and how to manage the questions that arise. I gather many attorneys who specialize in estates and trusts also serve as trustees. They should know what they are doing. If they are part of large and well established firms with sizeable practices in estates and trusts, then you could assume competence and continuity. You would have to see whether they had the customer relationship software and online access that you might expect from a bank or trust company.
Unless laws have changed in recent years, the only entities authorized to act as personal representatives and trustees are banks and trust companies chartered by the states or Comptroller of the Currency. Law firms, CPA firms or General Motors can’t act in these capacities.
Is this a substantive distinction? I know that our estates and trusts attorney serves as trustee for some clients. From reading bios of other attorneys in the field at other firms, many of them do this as well. I do not know whether the FIRM is trustee or the individual is the trustee. But what I meant was a bit longer and I did not bother to write it out "arrange to have an attorney from the firm serve as trustee with a successor from the same firm to take over when the individual initially appointed no longer serves." Technically, the trustee is always an individual. But the effect is continuity as a new attorney from the firm takes over when the current one steps aside.
Last edited by afan on Fri Dec 09, 2022 7:15 am, edited 1 time in total.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

Cruise wrote: Thu Dec 08, 2022 10:40 pm
I agree with your trust attorney being the first stop in your journey to find a corporate trustee. A point not mentioned, which was important to us: Having the corporate trustee in your own community (or close). For this reason, the less expensive option of Fidelity would not work for us. We want a relationship with a person who actually knows us (or will get to know us), and will visit us in our retirement community when we are no longer able to drive to their office.
Interesting point of view.

For us, having a local representative counts for zero. It is much more important for a corporate trustee to have a national scale and serve clients across the country. We do not know where we will be living when we retire. Even more, we have no idea where our kids may be living decades after we are gone. Having a branch across the street from us now counts for nothing. Since the beneficiaries could easily be thousands of miles away, we want a place that explicitly does NOT revolve around face to face interactions.

YMMV
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afan
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

As homstretch noted, Vanguard will not serve as trustee of a trust that holds real estate. All assets must be marketable securities. There was a post on here in which someone reported that Vanguard will not serve as trustee for some common type of bonds. I think is was i-bonds. You would have to be careful to go over your assets in detail to make sure you would not be leaving an estate with orphan assets.

Vanguard also will not serve as executor. If you need a professional to do this, you will have to make other arrangements, even if you want the money to end up at Vanguard as trustee.

No one is required to hire a bank, trust company or lawyer to serve as executor. I settled one estate, using an attorney for advice. It was not cheap, but the total fees were tiny compared to the % of assets formulas that a bank would have charged. I paid the lawyer out of the assets of the estate and did not charge anything for myself. More money for the beneficiaries.

Right now we have someone from our generation who will serve as executor, with a successor being one of our kids. When we get around to it, we will change that to be just the "kid".
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enad
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by enad »

Please-FIRE-Me wrote: Thu Dec 08, 2022 5:28 pm My Wife and I are establishing the trust / estate plan for our children. We are ~40 with young children. Our net worth is about $3-4M. I understand that corporate trust offices often charge 1-2% of assets per year to manage a trust in the event that my Wife and I are gone - this fee sounds excessive to me if we are not asking them to actively manage investment accounts (i.e. to leave the index funds alone). Another option would be to name our trusted CPA as the executor, or our lawyer - which I believe would be more cost effective.

Anyone have any advice or experience with this?
Our parents chose one of their children who was able to deal with issues related to the trust and consulted an attorney only when absolutely necessary. We have done the same with our children and hope they will do the same and left instructions on possible issues and an attorney that handles matters for us. We trust our children will do the same.
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afan
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

On the costs of asset management: when I dove into this years ago, these accounted for the bulk of the expenses with a bank or trust company. I base that on the difference between the cost if they serve as a traditional corporate trustee, managing the assets as well as doing the administrative work, vs the cost if they serve as directed trustee with another entity managing the investments. The cost for the latter was much lower.

Then it depends on who manages the investments. For our situation, it would be fine to have one of the beneficiaries do it, or let them hire someone. I looked into firms that would charge low 4 digit flat fees, regardless of the total value of the assets. I liked their approach. Some were almost as simple as our current portfolio and agreed that they would abandon efforts to beat the market by tilting and just hold a 3-fund portfolio. My concern with them was continuity. All the ones I found like this were very small shops and I did not feel confident that they would continue when the proprietor was no longer around.
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Please-FIRE-Me
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Please-FIRE-Me »

Thanks so much for taking the time to write these thoughtful comments, everyone. Amazing level of insight here! Some reactions and summaries:

-Yes, bsteiner, I was conflating executor and successor trustee. Your explanation was helpful, as is this page on Fidelity: https://www.fidelity.com/life-events/in ... or-trustee

-Sounds like the consensus based on experience here and our situation would be to have a corporate trustee (or co-trustee). We did not want to burden a family member with this complex work, and want a fiduciary 3rd party. We were considering the trusted CPA firm (which has experience with wealth management and trusts) or law firm (with same experience), but I'm wondering if there may be a benefit of having a separate entity (I.e. corporate trustee) to avoid any conflicts of interest. In any of these examples you try to establish a relationship with an individual person who would be the successor trustee, but you are relying on / naming that organization (trust office, law firm, CPA firm, etc) to have the expertise and staff to perform the service. I'm trying to get over the unsettling feeling of possibly turning over management of all our assets to a stranger :-) But that's why having a reputable organization (like a large trust corporation) would be beneficial. Also, Godparents live out of state and if my WIfe and I are gone the kids would be with them, so having national corporate trust would be good

-Yes it is reassuring to think that the asset management question only comes into play if both my wife (who is financially savvy) and I die while our children are too young to manage their own finances (which they hopefully would be able to do once into their 20s). After that we will revise the trust to name them as the trustees. I'm trying to get a sense of what the trust office will charge us annually for the next ~20yrs when (God willing) my wife and I are alive and managing all our assets. Anyone know if there are there minimal charges during this time?

Other interesting questions I will have to consider
-What to do with our real estate in the trust if my Wife and I die while children are young. We have the family home and some other property worth ~$2M. It might be cumbersome to keep it and manage it until the children are older, so I'm thinking the directive would be to sell (after step up in basis) and immediately re-invest in index funds.

-Vanguard trust seemed to have reasonable fee schedule. I see a somewhat similar one on Fidelity. We have assets with both. Anyone have experience with either?

Thanks, everyone!
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

afan wrote: Fri Dec 09, 2022 7:05 am
Gill wrote: Thu Dec 08, 2022 7:35 pm
afan wrote: Thu Dec 08, 2022 7:02 pm I suppose you could have a CPA or law firm as trustee. That would give continuity if the person you know were to retire, leave, or die. The other question would be whether they know what they are doing as trustee. You could investigate how much they know about the trustee responsibilities and how to manage the questions that arise. I gather many attorneys who specialize in estates and trusts also serve as trustees. They should know what they are doing. If they are part of large and well established firms with sizeable practices in estates and trusts, then you could assume competence and continuity. You would have to see whether they had the customer relationship software and online access that you might expect from a bank or trust company.
Unless laws have changed in recent years, the only entities authorized to act as personal representatives and trustees are banks and trust companies chartered by the states or Comptroller of the Currency. Law firms, CPA firms or General Motors can’t act in these capacities.
Is this a substantive distinction? I know that our estates and trusts attorney serves as trustee for some clients. From reading bios of other attorneys in the field at other firms, many of them do this as well. I do not know whether the FIRM is trustee or the individual is the trustee. But what I meant was a bit longer and I did not bother to write it out "arrange to have an attorney from the firm serve as trustee with a successor from the same firm to take over when the individual initially appointed no longer serves." Technically, the trustee is always an individual. But the effect is continuity as a new attorney from the firm takes over when the current one steps aside.
You have to name a specific person or easily identifiable role within the organization. Usually it’s something like Janet Jackson, current chief legal counsel of St. Jude’s, or the current person in the role. Or something like that. You can probably google an actual example, I’m just pulling it off the top of my head.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

How about "Janet Jackson, head of the estates and trusts division at XYZ (law firm). If Jackson no longer serves, then the then-current head of estates and trusts at XYZ. If XYZ ceases to have an estates and trusts division, then the last serving trustee will appoint a successor?"

And give the adult beneficiaries the right to change trustees, with appropriate restrictions depending on the goals of the grantor.
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celia
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by celia »

Raising your orphaned children is more important than what happens to your money. If you are comfortable with your choice of guardian for the kids, surely you can trust them with your money too and count on them for using your money to finish raising your kids (rather than making your kids a financial burden for them). This is also important since they will know the kids’ interests and strengths and where they need additional help (tutoring, choice of college) instead of just being an ATM for their expenses.

However, the guardian will have their hands full just raising your kids (and probably their own), so they should be given the latitude to seek outside help. They might even prefer to move into your house if it is larger than theirs, instead of selling it.

I would avoid lawyers as the trustee since they would likely charge the trust their professional hourly fee which would likely be more than a professional trust company charges. And there are no fees for the trust company until you die since there’s nothing for them to do right now.

Note that trust companies can go out of business or merge with other companies. Our original trust lawyer, about 30 years ago, insisted that we choose a trust company as the final successor trustee (after about 8 other relatives) in case they moved away or were unable to serve. I was re-reading the trust after 15 or 20 years and noticed all the relative successor trustees were still alive and living at the same address. It occurred to me to see if the trust company was at the same place. I googled them and they were nowhere to be found but it appeared they were merged with a second trust company. So I googled that company and couldn’t find any history of them either. So, in my case, our relatives were much more reliable than a non-existent trust company!
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

Gil said personal rep, not trustee. I’m unaware of statutory limitations on trustee nominations.

Either way the last line would be unnecessary as there’s usually successor reps and an ultimate backup trustee listed anyway.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by bltn »

enad wrote: Fri Dec 09, 2022 7:40 am
Please-FIRE-Me wrote: Thu Dec 08, 2022 5:28 pm My Wife and I are establishing the trust / estate plan for our children. We are ~40 with young children. Our net worth is about $3-4M. I understand that corporate trust offices often charge 1-2% of assets per year to manage a trust in the event that my Wife and I are gone - this fee sounds excessive to me if we are not asking them to actively manage investment accounts (i.e. to leave the index funds alone). Another option would be to name our trusted CPA as the executor, or our lawyer - which I believe would be more cost effective.

Anyone have any advice or experience with this?
Our parents chose one of their children who was able to deal with issues related to the trust and consulted an attorney only when absolutely necessary. We have done the same with our children and hope they will do the same and left instructions on possible issues and an attorney that handles matters for us. We trust our children will do the same.
This is the way our family has handled our inheritances. The children have overseen the inheritance from their parents, with the aid of the family estate lawyer. I will try to prepare both of my children for the transfer of our estate. The estate is only a little more complicated than previous generations but both of my kids will understand the trusts, direct transfers, and probate after we have some discussion. Our lawyer will fill in the holes, and add additional information as necessary
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

celia wrote: Fri Dec 09, 2022 1:51 pm

I would avoid lawyers as the trustee since they would likely charge the trust their professional hourly fee which would likely be more than a professional trust company charges. And there are no fees for the trust company until you die since there’s nothing for them to do right now.

Note that trust companies can go out of business or merge with other companies. Our original trust lawyer, about 30 years ago, insisted that we choose a trust company as the final successor trustee (after about 8 other relatives) in case they moved away or were unable to serve. I was re-reading the trust after 15 or 20 years and noticed all the relative successor trustees were still alive and living at the same address. It occurred to me to see if the trust company was at the same place. I googled them and they were nowhere to be found but it appeared they were merged with a second trust company. So I googled that company and couldn’t find any history of them either. So, in my case, our relatives were much more reliable than a non-existent trust company!
Trust companies charge quite a lot. I have spoken with people who believe thier attorneys charge less, since they only bill when they do something. Most of the time they do nothing, so there are no bills.

Say someone has a $2M trust. At 1%, the trust company would charge $20,000 for a year. Even if the lawyer charged $1,000/hour, which I gather is high even for a senior partner in estates and trusts at a top Manhattan law firm, it would take 20 hours per year to match that. I have never asked an attorney who serves as trustee how many hours they devote per account but I find it hard to imagine it is anywhere close to that.

If there is something that needed legal work, not just routine administrative tasks that the attorney would have done by office staff, then the trust company would hire a lawyer too.

I think the main things you get with a big established trust company are what Gil says. Experience in the day to day management of trusts, experience in managing the rare unusual cases if they come up, continuity, and a large organization that can keep serving the accounts as individuals come and go.

Yes, banks and trust companies can be merged out of existence but they do not simply disappear with the assets. If a bank fails and gets taken over, the business of those trust accounts is valuable. The new bank may simply fold them into their existing trust business or sell that business to a different bank that wants it. Either way, there would still be a corporate trustee.

Of course, if you go with a lawyer for trustee, someone has to manage he investments. If you hired someone to do it you would need to count their fees as well. I came away thinking the attorney as trustee route would likely be cheaper, particularly given the type of investment manager I would hire if the beneficiaries could not do it themselves.

Less expensive, but more hassle with perhaps needing more entities with which the beneficiaries must deal. A bank is simple in that regard. If Vanguard would keep their low fees but handled the range of investments that trust companies usually do, then the problem might be solved.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

A 2 million account will be charged less than 1% for that reason. A trustee would be expected to devote about an hour a month on routine tasks. But if a beneficiary is needy, that number goes up, same if there are dozens of them.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by beyou »

I am considering a special needs trust, so ongoing trustee responsibility and agree, choice of trustee is one of the challenges, maybe the biggest.

I see the job as many functions :

1) Spending decisions for beneficiary
2) pay bills
3) investment management
4) accounting/taxes
5) legal compliance

I would want a close relative or family friend who cares about the beneficiary, if possible, to perform 1 & 2.
3-5 are skills that some trustees may or may not feel capable to perform. IMO, 3 is one that many people can perform (especially bogleheads). 4 acctg/taxes, even if one does their own annual income tax return, there seems to be alot of extra work and knowledge here. 5 of course unless the trustee is an atty specializing in trusts/estates, very specialized.

As I see it, you can give a relative trustee job, have them take ownership of 1,2 and in case of my preferred trustee, 3 (teaching one adult child the boglehead investing concepts and he seems to get it). I would direct the trustee to hire a cpa and estate atty, pay them with trust funds to keep books, taxes in case of cpa, and compliance/decision making (estate atty). Seems to me that a corporate trustee is bundling the asset mgmt with some of the other skills, though not sure where they draw the line, when you need your own atty/cpa anyways. Why pay 1% to manage a portfolio ? Would rather pay a cpa to setup a proper recordkeeping process and do my taxes, and meet with an atty periodically to guide me if I was trustee. You spend $ either way, but you retain the services you can handle easily and best personalized, and outsource ONLY the parts that need specialized, impersonal skills.

My only concern, successor trustee. I have 2 sons, one who may benefit from a special needs trust, and one seems able to handle 1-3 responsibilities easily. I am considering another relative to be appointed “trust advisor” which is someone who wouldn’t have the checkbook, but could help the trustee find competent cpa/atty, sit in on planning meetings to make decisions, and have the trustee implement the decisions while paying bills. This could help with the conundrum of picking a trustee old enough to handle this, young enough to outlive you and your beneficiary. Can pick an older wiser relative as trust advisor, who can help setup a process and hire help, in my place, but hand the reigns to the younger trustee for the long haul. Hopefully the trust advisor wont be needed long term. One of their roles is to find new trustee if the trustee can’t or wont do the job. They could interview corporate trustees at higher expense, if the family member is not up to the task.

I am young enough (late 50s) that the best trustee may be hard to predict as they may not be needed for a very long time. My son may be older and more mature to handle it, or too busy to handle it. Best corp trustee may differ in 10 years vs now. This is part if what makes the whole process troubling to me. As initial trustee, I assume I can change my successor and advisor until my passing.

Thoughts ?
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by David_w »

JBTX wrote: Thu Dec 08, 2022 6:15 pm Our most recent trust we opted for a corporate trustee upon our demise. With special needs and spend thrift children, IRA’s in the trust and taxation, the operation and decisions of the trustee will not be trivial. The approx 1% annual fee will be well worth it. Previously we had designated financially competent relatives but at this point figured the level of complexity involved would not be fair to relatives who were trustees.
This is exactly what I am struggling with now with respect to a Special Needs Trust which I assume you have too? Would you mind if I private message you about the SNT?
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by LFS1234 »

afan wrote: Fri Dec 09, 2022 7:05 pm
Trust companies charge quite a lot. I have spoken with people who believe thier attorneys charge less, since they only bill when they do something. Most of the time they do nothing, so there are no bills.

Say someone has a $2M trust. At 1%, the trust company would charge $20,000 for a year. Even if the lawyer charged $1,000/hour, which I gather is high even for a senior partner in estates and trusts at a top Manhattan law firm, it would take 20 hours per year to match that. I have never asked an attorney who serves as trustee how many hours they devote per account but I find it hard to imagine it is anywhere close to that.
Attorneys-as-trustees can fail spectacularly, as can any individual trustee. Large well-established corporate trustees may be expensive, but their charges of 1%/year after death or incompetence can be a small price to pay in exchange for maximizing the odds of the money being used as originally intended. For situations where failure is not an option, I can't think of a better alternative.

See below regarding an attorney who absconded with $45.9 million from the trust for which he was responsible. It is a story which was turned into a televised episode on CNBC's "American Greed".

"Mark Avery, 57, who last resided in San Francisco, California, was sentenced today by U.S. District Judge Ralph R. Beistline. In addition to the prison term, Avery was also ordered to serve five years of supervised release, pay a $100,000 fine, and pay restitution to the May Smith Trust in the amount of $45,925,737.57."

https://www.justice.gov/usao-ak/pr/form ... -and-money

Also see:

https://www.courthousenews.com/feds-say ... t-for-52m/

Some excerpts:

"In opening comments Tuesday in Anchorage Federal Court, lawyers from each side offered their versions of how Mark Avery, a disbarred lawyer based in Anchorage and San Francisco, managed to spend millions of a trust he was supposed to protect in just six months."

"The $52 million spent from May Wong Smith's personal trust, valued at $100 million in 2005 and set aside for her care, was approved by all three trustees - including Avery."

"The two sides pointed out that trustees were paid $600,000 a year to administer the trust, were allowed to bill the trust on top of that salary for "their special work" and collect commissions."
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Outer Marker »

I have named a trusted friend as my Trustee. He'd also be the guardian (of my now nearly adult kids). I provided very specific guidance in the Trust documents of how I wanted the money invested and how I wanted it distributed. No need to pay someone 1 or 2 percent a year to administer an estate plan that is essentially on autopilot.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by winterfan »

We chose a family member who will be the guardian of our child. This person has our child's best interest in mind and will manage the money well until our child get to inheritance age. I also informed them to take a salary for themselves every year for the job. Hopefully we will be around for a long time and this becomes unnecessary!
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by JBTX »

David_w wrote: Sat Dec 10, 2022 7:18 am
JBTX wrote: Thu Dec 08, 2022 6:15 pm Our most recent trust we opted for a corporate trustee upon our demise. With special needs and spend thrift children, IRA’s in the trust and taxation, the operation and decisions of the trustee will not be trivial. The approx 1% annual fee will be well worth it. Previously we had designated financially competent relatives but at this point figured the level of complexity involved would not be fair to relatives who were trustees.
This is exactly what I am struggling with now with respect to a Special Needs Trust which I assume you have too? Would you mind if I private message you about the SNT?
Sure not a problem. Be forewarned I’m not a lawyer, and not a particular expert. Just what I’ve learned.

In our case we don’t have an SNT now, the SNT is created upon our deaths (testamentary) out of the revocable living trusts. We didn’t see any need for an SNT now. We do have an ABLE account. Also, you will find that some attorneys are not drafting SNT per se, they are putting language in the spendthrift trust such that it can function as an SNT if needed. It seemed like having an SNT now would be most useful if they were expecting a direct inheritance from another relative (or the possibility of an unexpected inheritance).
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by JBTX »

beyou wrote: Sat Dec 10, 2022 6:26 am I am considering a special needs trust, so ongoing trustee responsibility and agree, choice of trustee is one of the challenges, maybe the biggest.

I see the job as many functions :

1) Spending decisions for beneficiary
2) pay bills
3) investment management
4) accounting/taxes
5) legal compliance

I would want a close relative or family friend who cares about the beneficiary, if possible, to perform 1 & 2.
3-5 are skills that some trustees may or may not feel capable to perform. IMO, 3 is one that many people can perform (especially bogleheads). 4 acctg/taxes, even if one does their own annual income tax return, there seems to be alot of extra work and knowledge here. 5 of course unless the trustee is an atty specializing in trusts/estates, very specialized.

As I see it, you can give a relative trustee job, have them take ownership of 1,2 and in case of my preferred trustee, 3 (teaching one adult child the boglehead investing concepts and he seems to get it). I would direct the trustee to hire a cpa and estate atty, pay them with trust funds to keep books, taxes in case of cpa, and compliance/decision making (estate atty). Seems to me that a corporate trustee is bundling the asset mgmt with some of the other skills, though not sure where they draw the line, when you need your own atty/cpa anyways. Why pay 1% to manage a portfolio ? Would rather pay a cpa to setup a proper recordkeeping process and do my taxes, and meet with an atty periodically to guide me if I was trustee. You spend $ either way, but you retain the services you can handle easily and best personalized, and outsource ONLY the parts that need specialized, impersonal skills.

My only concern, successor trustee. I have 2 sons, one who may benefit from a special needs trust, and one seems able to handle 1-3 responsibilities easily. I am considering another relative to be appointed “trust advisor” which is someone who wouldn’t have the checkbook, but could help the trustee find competent cpa/atty, sit in on planning meetings to make decisions, and have the trustee implement the decisions while paying bills. This could help with the conundrum of picking a trustee old enough to handle this, young enough to outlive you and your beneficiary. Can pick an older wiser relative as trust advisor, who can help setup a process and hire help, in my place, but hand the reigns to the younger trustee for the long haul. Hopefully the trust advisor wont be needed long term. One of their roles is to find new trustee if the trustee can’t or wont do the job. They could interview corporate trustees at higher expense, if the family member is not up to the task.

I am young enough (late 50s) that the best trustee may be hard to predict as they may not be needed for a very long time. My son may be older and more mature to handle it, or too busy to handle it. Best corp trustee may differ in 10 years vs now. This is part if what makes the whole process troubling to me. As initial trustee, I assume I can change my successor and advisor until my passing.

Thoughts ?
The way ours is set up is a ranked list of trustees for the eventual is set up in the trust, and then there is an”trust committee” of 3 relative siblings who have the power to change the trustee if there is an issue with the existing one.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

beyou wrote: Sat Dec 10, 2022 6:26 am
Thoughts ?
Nominate special purpose trustees. One to manage the money, one to manage the spending.

Nominate trustees who specialize in special needs care to manage the day to day life.

Allow the beneficiary to remove and replace trustees under certain conditions.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

beyou wrote: Sat Dec 10, 2022 6:26 am I am considering a special needs trust, so ongoing trustee responsibility and agree, choice of trustee is one of the challenges, maybe the biggest.

I see the job as many functions :

1) Spending decisions for beneficiary
2) pay bills
3) investment management
4) accounting/taxes
5) legal compliance

I would want a close relative or family friend who cares about the beneficiary, if possible, to perform 1 & 2.
3-5 are skills that some trustees may or may not feel capable to perform. IMO, 3 is one that many people can perform (especially bogleheads). 4 acctg/taxes, even if one does their own annual income tax return, there seems to be alot of extra work and knowledge here. 5 of course unless the trustee is an atty specializing in trusts/estates, very specialized.

As I see it, you can give a relative trustee job, have them take ownership of 1,2 and in case of my preferred trustee, 3 (teaching one adult child the boglehead investing concepts and he seems to get it). I would direct the trustee to hire a cpa and estate atty, pay them with trust funds to keep books, taxes in case of cpa, and compliance/decision making (estate atty). Seems to me that a corporate trustee is bundling the asset mgmt with some of the other skills, though not sure where they draw the line, when you need your own atty/cpa anyways. Why pay 1% to manage a portfolio ? Would rather pay a cpa to setup a proper recordkeeping process and do my taxes, and meet with an atty periodically to guide me if I was trustee. You spend $ either way, but you retain the services you can handle easily and best personalized, and outsource ONLY the parts that need specialized, impersonal skills.

My only concern, successor trustee. I have 2 sons, one who may benefit from a special needs trust, and one seems able to handle 1-3 responsibilities easily. I am considering another relative to be appointed “trust advisor” which is someone who wouldn’t have the checkbook, but could help the trustee find competent cpa/atty, sit in on planning meetings to make decisions, and have the trustee implement the decisions while paying bills. This could help with the conundrum of picking a trustee old enough to handle this, young enough to outlive you and your beneficiary. Can pick an older wiser relative as trust advisor, who can help setup a process and hire help, in my place, but hand the reigns to the younger trustee for the long haul. Hopefully the trust advisor wont be needed long term. One of their roles is to find new trustee if the trustee can’t or wont do the job. They could interview corporate trustees at higher expense, if the family member is not up to the task.

I am young enough (late 50s) that the best trustee may be hard to predict as they may not be needed for a very long time. My son may be older and more mature to handle it, or too busy to handle it. Best corp trustee may differ in 10 years vs now. This is part if what makes the whole process troubling to me. As initial trustee, I assume I can change my successor and advisor until my passing.

Thoughts ?
Sounds complicated.

For now, we have a same generation relative who will serve as trustee, with one of our kids as successor. The trustee can decide whether to hire someone to prepare taxes or when they need an attorney's help. We trust those two individuals to manage the money and do the administrative work, the latter being minimal. A brokerage will hold the assets and produce statements. There should be little in the way of transactions. To the extent there are dividends to be reinvested, that could be in autopilot.

For longer term, say if there are later beneficiaries who cannot manage these tasks on their own, then the greater complexity may be necessary. If that happens, a conventional corporate trustee may be the only answer.

The frustrating thing is that, against all evidence, the trust world seems stubbornly fixed on the glories of active management. And the high fees, turnover and tax inefficiency associated with it. Vanguard seems as close to 3-fund as I have found from a corporate trustee. We have not found a great solution for this hypothetical long term need when we may not be able to count on the beneficiaries.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

Lee_WSP wrote: Fri Dec 09, 2022 11:13 pm A 2 million account will be charged less than 1% for that reason. A trustee would be expected to devote about an hour a month on routine tasks. But if a beneficiary is needy, that number goes up, same if there are dozens of them.
When I was searching for trustees, I was being quoted higher costs for a trust of this size. At least two places said that that typically do not accept trusts of that size at all. For the exceptions, say when they expected the corpus to increase greatly in the future, the fees were over 2% for a $2M trust. Except for Vanguard, of course.

An hour a month is much more time than I spend on my total financial life.

What would someone be doing with a 3-fund portfolio and either no distributions (and no requests) or distributions on autopilot?

What else is there to do?
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

afan wrote: Sat Dec 10, 2022 1:01 pm
Lee_WSP wrote: Fri Dec 09, 2022 11:13 pm A 2 million account will be charged less than 1% for that reason. A trustee would be expected to devote about an hour a month on routine tasks. But if a beneficiary is needy, that number goes up, same if there are dozens of them.
When I was searching for trustees, I was being quoted higher costs for a trust of this size. At least two places said that that typically do not accept trusts of that size at all. For the exceptions, say when they expected the corpus to increase greatly in the future, the fees were over 2% for a $2M trust. Except for Vanguard, of course.

An hour a month is much more time than I spend on my total financial life.

What would someone be doing with a 3-fund portfolio and either no distributions (and no requests) or distributions on autopilot?

What else is there to do?
We spend a lot more time on our personal finances than we think.

A trustee manages someone else’s money so they need to stay on top of the books much more regularly. Very similar to how a business bookkeeper needs to run payroll and log and catalog all the expenses. Then reconcile everything at the end.

In addition to the accounting, the trustee needs to determine the monthly distributions and whether everything is going according to plan.

Is it a lot of box checking? Yes. But that’s basically what you’re paying them to do. Make sure the trust doesn’t run out of money prematurely.

You need to find a smaller trustee and aggressively negotiate to get good fees. Your lawyer should know the players.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

You are probably right about the negotiation. I am still stuck in fund expense ratio thinking, where there is nothing to negotiate.

My lawyer did offer some suggestions of small local banks but again, I wanted something national, since I was not assuming that I or later beneficiaries would live anywhere near where we are now. The very last thing I would want is a company that wanted anyone to show up in person. I would be looking for a place that could serve as trustee for decades with without me or any beneficiary even knowing where the trust officers work, let alone ever needing to meet them in person.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by beyou »

Lee_WSP wrote: Sat Dec 10, 2022 1:09 pm
afan wrote: Sat Dec 10, 2022 1:01 pm
Lee_WSP wrote: Fri Dec 09, 2022 11:13 pm A 2 million account will be charged less than 1% for that reason. A trustee would be expected to devote about an hour a month on routine tasks. But if a beneficiary is needy, that number goes up, same if there are dozens of them.
When I was searching for trustees, I was being quoted higher costs for a trust of this size. At least two places said that that typically do not accept trusts of that size at all. For the exceptions, say when they expected the corpus to increase greatly in the future, the fees were over 2% for a $2M trust. Except for Vanguard, of course.

An hour a month is much more time than I spend on my total financial life.

What would someone be doing with a 3-fund portfolio and either no distributions (and no requests) or distributions on autopilot?

What else is there to do?
We spend a lot more time on our personal finances than we think.

A trustee manages someone else’s money so they need to stay on top of the books much more regularly. Very similar to how a business bookkeeper needs to run payroll and log and catalog all the expenses. Then reconcile everything at the end.

In addition to the accounting, the trustee needs to determine the monthly distributions and whether everything is going according to plan.

Is it a lot of box checking? Yes. But that’s basically what you’re paying them to do. Make sure the trust doesn’t run out of money prematurely.

You need to find a smaller trustee and aggressively negotiate to get good fees. Your lawyer should know the players.
There are attorneys who advertise "Trust Administrative" services in my area. They claim to help the trustee ensure compliance with various rules
related to reporting and taxation. Going to meet with one soon to discuss both trust creation and longer term administration capability.
I still want one son to be trustee for the other, though there are counterarguments.
Son would work in best interests of his brother, and willing to manage with a simple low fee index portfolio.
Counterargument against son as trustee are many. He is only one person, may be busy etc. He is also our remainder beneficiary, would be a conflict of interest.

I am considering as a successor to my son, maybe a trustee to manage the money like Vanguard, and a separate trustee for property management there be a house owned vs a rental. I am a bit scared to use Vanguard given all their recent client service issues, but this is very expensive otherwise.
Will discuss this with my attorney, though the estate attorneys I found locally also are CFP and want to manage the money too, and you can be sure it would be with high fees.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by celia »

afan wrote: Fri Dec 09, 2022 7:05 pm
celia wrote: Fri Dec 09, 2022 1:51 pm I would avoid lawyers as the trustee since they would likely charge the trust their professional hourly fee which would likely be more than a professional trust company charges. And there are no fees for the trust company until you die since there’s nothing for them to do right now.
Trust companies charge quite a lot. I have spoken with people who believe thier attorneys charge less, since they only bill when they do something. Most of the time they do nothing, so there are no bills.
I assume you’ve never been a trustee. There are things they must do each year (but not necessarily evey month):

There are discussions with beneficiaries/ guardians and judgement calls need to be made.
Taxes need to be paid.
Distributions may need to be made on a regular or irregular schedule.
Reporting likely needs to be done at the end of the year to someone.

This is the minimum, when everything goes well. . . Of course, the lawyer will farm out some of those tasks and bill the trust.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

afan wrote: Sat Dec 10, 2022 1:23 pm You are probably right about the negotiation. I am still stuck in fund expense ratio thinking, where there is nothing to negotiate.

My lawyer did offer some suggestions of small local banks but again, I wanted something national, since I was not assuming that I or later beneficiaries would live anywhere near where we are now. The very last thing I would want is a company that wanted anyone to show up in person. I would be looking for a place that could serve as trustee for decades with without me or any beneficiary even knowing where the trust officers work, let alone ever needing to meet them in person.
Try talking to Zia Trust or Arden Trust. You don’t need a national trustee, they’re expensive. You just need the ability to change situs and trustees if needs be.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

beyou wrote: Sat Dec 10, 2022 1:28 pm
There are attorneys who advertise "Trust Administrative" services in my area. They claim to help the trustee ensure compliance with various rules
related to reporting and taxation. Going to meet with one soon to discuss both trust creation and longer term administration capability.
I still want one son to be trustee for the other, though there are counterarguments.
Son would work in best interests of his brother, and willing to manage with a simple low fee index portfolio.
Counterargument against son as trustee are many. He is only one person, may be busy etc. He is also our remainder beneficiary, would be a conflict of interest.

I am considering as a successor to my son, maybe a trustee to manage the money like Vanguard, and a separate trustee for property management there be a house owned vs a rental. I am a bit scared to use Vanguard given all their recent client service issues, but this is very expensive otherwise.
Will discuss this with my attorney, though the estate attorneys I found locally also are CFP and want to manage the money too, and you can be sure it would be with high fees.
I recommend keeping the estate liquid and simple. Let vanguard or another index fund trustee manage the money and distributions and your other son can manage the care. Have backups for the other son so he can quit without feeling bad. You may want to place a formula for how second son or family members would be paid.

You can look into attorneys outside of your city and even state (you’d need a local one for the final review and signing ceremony).

There’s a couple firms who are a weird hybrid financing services and estate planning combo. Probably best to just steer clear since we know which one is the money maker for them.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

celia wrote: Sat Dec 10, 2022 2:17 pm
I assume you’ve never been a trustee. There are things they must do each year (but not necessarily evey month):

There are discussions with beneficiaries/ guardians and judgement calls need to be made.
Taxes need to be paid.
Distributions may need to be made on a regular or irregular schedule.
Reporting likely needs to be done at the end of the year to someone.

This is the minimum, when everything goes well. . . Of course, the lawyer will farm out some of those tasks and bill the trust.
Actually, I am a trustee now.

I talk occasionally with the beneficiary- which I would do anyway, distributions are on autopilot, hired an enrolled agent for tax preparation. Statements from the broker cover reporting. Portfolio is basic 3 fund, so no complex investment management involved. I am looking for other things I need to do.

Right now, I would find it hard to pay someone 1% of the beneficiary's money for the work I have been doing. If I come across something that is more complicated I will probably have Vanguard do it, since there is no real estate and there would be no need for an executor. But 0.55% of assets is a lot more than zero, which is what I charge.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by beyou »

Lee_WSP wrote: Sat Dec 10, 2022 2:36 pm
beyou wrote: Sat Dec 10, 2022 1:28 pm
There are attorneys who advertise "Trust Administrative" services in my area. They claim to help the trustee ensure compliance with various rules
related to reporting and taxation. Going to meet with one soon to discuss both trust creation and longer term administration capability.
I still want one son to be trustee for the other, though there are counterarguments.
Son would work in best interests of his brother, and willing to manage with a simple low fee index portfolio.
Counterargument against son as trustee are many. He is only one person, may be busy etc. He is also our remainder beneficiary, would be a conflict of interest.

I am considering as a successor to my son, maybe a trustee to manage the money like Vanguard, and a separate trustee for property management there be a house owned vs a rental. I am a bit scared to use Vanguard given all their recent client service issues, but this is very expensive otherwise.
Will discuss this with my attorney, though the estate attorneys I found locally also are CFP and want to manage the money too, and you can be sure it would be with high fees.
I recommend keeping the estate liquid and simple. Let vanguard or another index fund trustee manage the money and distributions and your other son can manage the care. Have backups for the other son so he can quit without feeling bad. You may want to place a formula for how second son or family members would be paid.

You can look into attorneys outside of your city and even state (you’d need a local one for the final review and signing ceremony).

There’s a couple firms who are a weird hybrid financing services and estate planning combo. Probably best to just steer clear since we know which one is the money maker for them.
I was going to leave my taxable acct to the trust, which is already a 3-fund portfolio (muni index, vti and and international index ETF with high % of qual dividends). Planned to tell son (in written instructions) to more or less use the portfolio as-is, just rebalance to appropriate risk level, that’s it). No need for an asset manager. It’s all the accounting, tax returns, and compliance with SSA or other rules where outsourcing seems valuable. I want to pay for lawyers and CPA to do that for the SNT, guiding my trustee son as to distributions and reporting data he must gather and provide to either professional. I hate the idea of paying for an investment advisor when I have a tax efficient simple portfolio he can easily manage.

401k, IRA would be left directly to the trustee son.
Taxable to the SNT, to keep the things simple for taxes etc.

Not sure what you meant about location of attorneys.
I live in one state with disabled son, other son is in a different state. I would think all legal and CPA work needs to be done in my state where the SNT will be created.

Wondering about house, considering leaving to SNT, can sell to raise more cash and rent, or trustee can hire property manager to manage from afar, as if he is landlord.
Last edited by beyou on Sat Dec 10, 2022 2:59 pm, edited 1 time in total.
afan
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

The other thing that would be useful but trust companies apparently do not do, would be paying bills.

Right mow we have the fixed amount monthly bills go directly to the creditors but still count on the beneficiary to manage some bill paying on their own from monthly distribution from the trust. The beneficiary is doing OK, sort of, but getting worse. At some point I will need a solution for that.

Unfortunately, when I asked corporate trustees whether they would do bill paying the answer was always no. All those pictures of smiling carefree families enjoying themselves may not be worried about their investments, but they still need to check and pay their bills. Hiring a corporate trustee but with no bill paying would not be worthwhile. That would mean 0.55-2% of assets going away each year to an entity that still does not do the single most useful thing I would want.

Anyone have a long term solution fo bill paying? Or know of trust companies that will do this?
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beyou
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by beyou »

afan wrote: Sat Dec 10, 2022 2:59 pm The other thing that would be useful but trust companies apparently do not do, would be paying bills.

Right mow we have the fixed amount monthly bills go directly to the creditors but still count on the beneficiary to manage some bill paying on their own from monthly distribution from the trust. The beneficiary is doing OK, sort of, but getting worse. At some point I will need a solution for that.

Unfortunately, when I asked corporate trustees whether they would do bill paying the answer was always no. All those pictures of smiling carefree families enjoying themselves may not be worried about their investments, but they still need to check and pay their bills. Hiring a corporate trustee but with no bill paying would not be worthwhile. That would mean 0.55-2% of assets going away each year to an entity that still does not do the single most useful thing I would want.

Anyone have a long term solution fo bill paying? Or know of trust companies that will do this?
This is one of the main practical responsibilities for a special needs trust. You can’t give cash to the beneficiary, you have to pay their bills, both to keep SS benefits and in some cases because the beneficiary may not be able to do it themselves anyway.

I want my son to maintain my 3 fund portfolio and pay bills for his siblibg, and hire CPA/atty for all else. I am researching to see how feasible.
Last edited by beyou on Sat Dec 10, 2022 3:03 pm, edited 1 time in total.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by Lee_WSP »

Unlike the investing, the taxation and reporting and decisions thereof are not simple affairs you can just plug into turbo tax.

While I fully agree it’s irksome to have to pay a manager to manage the money (you can also leave that task to a bogle head like individual), I would say that the taxes and distributions and forecasting may be best left to impartial professionals. IMO anyway.
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by beyou »

Lee_WSP wrote: Sat Dec 10, 2022 3:03 pm Unlike the investing, the taxation and reporting and decisions thereof are not simple affairs you can just plug into turbo tax.

While I fully agree it’s irksome to have to pay a manager to manage the money (you can also leave that task to a bogle head like individual), I would say that the taxes and distributions and forecasting may be best left to impartial professionals. IMO anyway.
Are you saying it is tough to separate these ?
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

If I needed to comply with strict or complicated regulations about how the trust were managed or what expenses it could pay without ruining the tax or creditor protections, then I would probably want a corporate trustee for which this would be routine. If nothing else, I would count on them knowing what to do and documenting that everything was done correctly.

As it is, there is nothing like that for this trust. No special provisions, no limitations in the trust document, no special tax considerations. According to our lawyer, there really is nothing else to do. I could not pay 0.55-2% of the beneficiary's money for that.

For our estate, the dollar amounts would be greater but the banks still want to do active management, invest in individual stocks and charge a lot of money while doing it. Not appealing.
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afan
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Re: Choosing Estate Trustee - corporate, CPA, lawyer or other?

Post by afan »

Lee_WSP wrote: Sat Dec 10, 2022 3:03 pm Unlike the investing, the taxation and reporting and decisions thereof are not simple affairs you can just plug into turbo tax.

While I fully agree it’s irksome to have to pay a manager to manage the money (you can also leave that task to a bogle head like individual), I would say that the taxes and distributions and forecasting may be best left to impartial professionals. IMO anyway.
Lee, can you give some examples?

If there is something I am supposed to do I want to do it. But so far, neither taxes nor distributions have been complicated at all. As I said, when I took the job I went over the trust with an expert estates and trusts attorney and they did not point out anything special I needed to do.

What sort of tax or distribution decisions are there?
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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