How Best Can I Arrange for Financial Management if I’m Single?
I’m single, age 71, with no one able or capable to serve as my agent under a durable of attorney. My concern is what happens if I become mentally incapacitated. I have investments at Vanguard with beneficiary noted (charity). I can do that at my bank for those accounts. I will talk with an elder care attorney and set up a will to cover my my house and a few other things.
That takes care of what happens to my property upon my death, but if I become incapacitated, do I need to now set up a revocable trust with that expense and complexity to manage all my finances? It seems I need a professional (attorney, bank, trust company) to manage that and another third party to check payments and expenditures monthly to ensure no fraud. One concern I have is that the financial planner my attorney uses to manage money would remove all my Vanguard funds and put the money into an account for me at Fidelity where he keeps such accounts. I assume any trust or other entity doing this would also take all my money (think of the taxes) and put it their funds where they manage it. And they will charge me 1% of my value every year to manage the funds. Am I on the right track? Am I missing anything?
You are on the right track. You can retain an attorney to act as your agent under a durable power of attorney. And you can hire the attorney or a bank or trust company to act as trustee of your trust. A financial institution would have its own investment professionals while an attorney would be likely to hire in investment advisor or firm. Depending on your arrangement and the level of your assets, the cost is likely to be in the range of 1% annually.
One area where using a professional financial advisor or trustee may be better than you think is that they should be able to move your current holdings without liquidating them, avoiding any tax on capital gain. A Fidelity account, for instance, can hold Vanguard funds. You might be able to save some money by creating a trust now with you acting as your own trustee while you are able to do so and the financial institution as back up to step in in the event of your incapacity. The only challenge here is figuring out the mechanism for determining when you’re incapacitated and letting the financial institution know.
Finally, don’t be too concerned about the cost of using a financial advisor or professional trustee. They generally provide sufficient service and financial acumen to more than justify their 1% fee.