Can a Trust Hold Funds in a Low-Cost Investment Account in Order to Reduce Costs?
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Question:
My siblings have an irrevocable trust with a few million dollars in stock assets. Is there a place to avoid the fee of parking the assets outside of a trust manager? We don’t want to sell any assets in the trust, just distribute dividends and the stocks themselves over the next few years. We have trustees who work with us and allow for distributions. Is there a place to park the assets cheaper than the “standard” 1/2 percent? E.g. Charles Schwab, Fidelity, etc?
Response:
You use the term “trust manager” as opposed to “trustee” or “investment manager.” I’m going to assume, that since you say the trust does have separate trustees, that you mean investment manager. Yes, the trustees can choose to hold the investments at a low-cost brokerage firm but the trustees may not be willing to take on the extra liability this would entail.
However, many trustees don’t feel comfortable being responsible for investments, so they hire outside advisors or managers for this purpose. It sounds like that is what your trustees have done which is why there is an extra fee for investment management.
You may feel that this is unnecessary since your family doesn’t plan to make any investment changes, just to disburse the funds over time. If you trustees are professionals, meaning a trust company, bank or lawyers, they may have policies requiring outside professional management that they won’t change for particular trusts. If they are individuals, they may be willing to dispense with investment management if all the beneficiaries were willing to sign releases for taking this course. You could discuss that with them.
Related Articles:
How Much are Trustee Fees for a Larger Trust?
What Would a Bank Trustee Charge for a Simple Trust with Quarterly Distributions?
What is a Standard Trustee Fee?
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