Author Topic: How to set up trust that invests in index funds with low trust mgmt fees?  (Read 2105 times)

Bob W

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I'm interested in setting up a trust fund for current assets and life insurance to fund upon death.

I have a pretty high bar --

1.  Low trust mgmt. fees.  Ideally less than way less than 1%.
2.  Would want trust to invest in funds similar to a well managed Community Foundation type portfolio with a 10% target return and a 3-4% annual payout.   
3.  I would be willing to pay to have the trust document written up. 

I can find an attorney locally but I am having a hard time finding a trust administrator.

Any suggestions?  Other thoughts?

forummm

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Why create a returns target for #2? Why not set specific Vanguard funds that the trust must invest in, along with specific percentages allocated to each? You can make the descriptions open ended in case Vanguard alters the funds a bit. For example:

"The trust's assets shall be invested as follows:
50% in the Vanguard Total Stock Market Index Fund (or comparable low-cost passive index fund investing in approximately the entire investible portion of the United States stock market);
40% in the Vanguard Total International Stock Market Index Fund (or comparable low-cost passive index fund investing in approximately the entire investible portion of the stock markets located outside the United States);
10% in the Vanguard Total Bond Index Fund (or comparable low-cost passive index fund investing in approximately the entire investible portion of the United States bond market)
This targeted allocation of assets shall be attained through rebalancing the holdings on the first business day in June of each year.
Each year the trust should spend on charitable causes the greater of 1) 4% of the cash value of the holdings, or 2) the minimum amount required by United States law to maintain the trust's tax-exempt status."

bacchi

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Is this a charitable trust? They have to pay out 5%.

micahfire

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Couple of things jump out:

Most trustee acts will limit your investment choices into diversified investments of "prudent choices", 10% target returns are out of the question. Secondly, you will not find a respectable trust company that will remain in some form into the future to manage a perpetual trust charging less than 1%. You have to pay if you want to play (this is a tax deductible management fee in Canada, not sure about the U.S) For Charitable purpose trusts all income is required to be paid out each year, you can't set a limit, at least in Canada, in order to maintain its tax status.

Big banks will offer a foundation setup that would be most cost, and tax-effective through their trust companies. I would imagine other banks around the world would too, but you'd need to ensure you have more than $1 million in investable assets at present before they would entertain you. There also comes a time where one has to realize that one can not rule from the grave forever and limiting investment choices and companies are generally not recommended as you/the trust would spend a fortune in legal fees in the future varying trust agreements in court.
« Last Edit: May 30, 2015, 04:36:39 AM by AllTheMarshmallows »

Bob W

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Is this a charitable trust? They have to pay out 5%.
LPP it is not.