Handing over the keys to my parents' money

March 9, 2007 8:26 AM

Co-trustees, executors, personal representatives, powers-of-attorney: my sibling and I have all the authority necessary to manage my aging mother's finances following my father's death, but not all that much expertise or time. What success or cautionary tales have you had with using banks as trustees, agents, or investment advisers -- or alternatives?

My father left behind a substantial amount in assets, about half of it in a tax-deferred IRA in several funds, a number of individual stocks in a trust in his name, a trust in my mother's name, and jointly held assets. We are investing ourselves, so to speak, in the initial process of figuring out what lies where, what my mother (who is in her mid-70s and lacks any experience or capacity for finances whatsoever) needs to disclaim in order to maximize my father's estate tax deduction, what (relatively little) needs to be probated, and so forth -- with the help of a good accountant and a good attorney.

Longer term, though, we need to manage these assets to ensure that my mother's needs are addressed (she has just moved into a nursing home and will have substantial costs there, though we have a high degree of confidence that assets will earn enough income to cover that) and to avoid doing any foolish with respect to our own longer-term interests. A local branch of a national bank with which my parents had several accounts, and in the community where my mother will likely continue to reside, has pitched itself to act as an agent or trustee on some or all of these assets, with a fee that would probably average 1% annually across the assets as a whole. This means 20 to 40K annually, on the one hand, and a leap of faith. But it also means less stress for us, and (presumably) greater expertise in making investment decisions. Are there hidden pitfalls or additional considerations we should be taking into account? I know this is vague, and apologize for that, but at least no response will be off-topic . . . Thanks to all.

posted by Clyde Mnestra to work & money (7 comments total)

First of all, that sounds like a pretty hefty fee. I'm not experienced in this area, but I do know that it won't take somebody even a month of work a year to handle your account. Handling it yourself, with the help of a fee only financial planner sounds like a good plan. Really, it'll be fire and forget once the setup gets going.

You seem to have two distinct phases that this money needs to go through. The first is the care of your mother. That means it needs to be in fairly conservative, income generating assets. Then, when your mother passes away, there is the inheritance and dealing with money after that. At that point, it should be shifted towards more aggressive assets to maximize the wealth generated.

It sounds like you have a great intergenerational nest egg, and a financial planner will know what to do with it.

As for the price of a financial planner, paying one 5 grand a year will pay for a week or two of their time. That will be enough to evaluate all your needs, figure where the money should be put, and how to distribute it when bills need to be paid.
posted by cschneid at 8:37 AM on March 9, 2007

Having someone manage this for you might not be a bad idea, but shop around. 1% is, as cschneid pointed it, crazy high. With the amount of money you're talking about, one eighth of a percent is a reasonable fee.
posted by phoenixy at 8:50 AM on March 9, 2007

Lawyer up. Trusts and Estates lawyers aren't just for wills and dealing with the legal and financial aspects of death, they also have (or a good one should have) the skills, tools and resources to help manage the corpus of the estate for the benefit of you and any existing or future member of your family, and also to be an independent arbiter in the event that intra-family disputes or differences arise.. Plus, a good attorney who has experience with this type of practice will have contacts with banks and investment companies, and because of the amount of business they bring to said banks and investment companies, will be charged a much lower rate than you would be able to get on your own. Of course, you'll have to pay attorney's fees, but those fees won't be derived proportionally from the size of your family's investments. Also, you'll have a professional who is looking out for your family's interests watching over the bankers and brokers who are handling your family's money.
IMHO, that's they best option if you don't have the time or expertise to do it yourself.
posted by diggerroo at 9:19 AM on March 9, 2007

I consulted with an attorney who specializes in eldercare issues when I made similar arrangements for my Mom last year, and with a fee-only financial planner.

It was money very well spent.
posted by enrevanche at 9:20 AM on March 9, 2007

At work I see people all the time that come to us with problems caused by rushing into a situation like this without consulting an attorney. I would high suggesting talking to an attorney who specializes in probate and estates.

Check out the ABA's Lawyer Referral page to get a link to a LRS in your area/county (assuming you are in the US). The local Bar Associations will be best at directing you to a local lawyer who specializes in this sort of thing.
posted by aurigus at 9:28 AM on March 9, 2007

Thanks for the suggestions. As I tried to indicate in the original post, I have consulted with an attorney, and we have a good working relationship with him. But he is not an expert investor, and I'd be more wary of his legal talents if he held himself out as one; he has noted that some possible avenues for securing that expertise, including the bank in question, but (judiciously, I think) has not taken on the role of selecting one for us. And, my goodness, were it the case that when he did so, we'd get a better rate because of the volume of business he steered, I would be all the warier!

So the question re. investment advice remains, but I do appreciate the point that an up-front fee-only financial adviser may be the way to go. I gather that one common concern in those cases is that the financial adviser is also compensated by the funds to which clients are directed (as opposed to banks, which in theory are directly incented to increase the size of the assets, and may assume a formally fiduciary relationship).
posted by Clyde Mnestra at 2:03 PM on March 9, 2007

Go to this site to find a member of the National Academy of Elder Law Attorneys in your area. This kind of specialist will know who the corporate trustees are and which ones charge reasonable fees, and (more importantly) will know the capable and reliable financial planners in your area.

There are numerous financial planners who will manage the funds for you, and following the strategy that you set down, and they will often do so for much less than a corporate trustee will charge.
posted by megatherium at 2:06 PM on March 9, 2007