Irrevocable Trust Schwab

[rick43221]

Hello

I am thinking about a Charles Schwab irrevocable trust where they manage it. Only 5000K per annum to manage the trust this is cheaper than fidelity or vanguard for the assets I have.
This is a form of asset protection in the event of a lawsuit.
Does anyone have any experience with Charles Schwab. How did they set up their trust.
I have other forms of income so I can afford to do this?
Any recommendations?
I do not want revocable.

[jfoxcpacfp]

Hello

I am thinking about a Charles Schwab irrevocable trust where they manage it. Only 5000K per annum to manage the trust this is cheaper than fidelity or vanguard for the assets I have.
This is a form of asset protection in the event of a lawsuit.
Does anyone have any experience with Charles Schwab. How did they set up their trust.
I have other forms of income so I can afford to do this?
Any recommendations?
I do not want revocable.

Oh, man, if you have enough to assets/complexities to need an IRT during your lifetime, you definitely don’t need to be getting advice about what to do on a public forum, even a public finance forum. We all know it’s a form of asset protection, but spending $5k/yr for management is not the point. Determining the terms of the trust document is of utmost importance and you need an experienced E&T attorney for that, not a brokerage. And an experienced CPA/financial planner for a 2nd opinion.

[afan]

Or, perhaps better, a second opinion from another estates and trusts attorney.

From the sound of it, you are creating a domestic asset protection trust. This has to be done in an asset protection state and the trustee has to operate it as such a trust. I think Schwab's trusts are in Nevada, which supposed to be a good asset protection state. There are other states that may be better for you. Something to go over with your lawyer.

Note that these trusts have very little in the way of trial and appeal evidence that they actually work. They are sold as asset protection but no one knows how they perform when put to the test.

I assume you meant $5,000/year, not $5,000k, which would be 5 million for managing the trust.

That is a good price if it includes all the trustee services. Setting up the trust will cost considerably more than that.

[rick43221]

No this is not asset protection for me, it is to give to other people/relatives. Yes I am fortunate to be able to do that. This is my second gift of a sizeable amount in my lifetime at age 44. I will still have plenty left over. Thanks to the US stock market. Had I not been giving it away I would be sitting on retirement right now

[White.Beard.Doc]

I am helping an elderly relative move their trust accounts away from a very expensive bank trust department (roughly 2% per annum in total fees for a long a la carte menu of various fees, and continuously rising). We vetted new options including Vanguard and other bank trust departments, along with Schwab.

Schwab is the cheapest at 0.5% all inclusive, and they seem to offer essentially similar services in comparison with the other options. One negative factor is that Schwab may be less personal and be more of a Zoom conference relationship with the trust folks in Nevada and a more in person relationship with the Schwab investment rep in the local branch. However, saving massive amounts of fees in comparison with the big bank trust department is worth it to the primary beneficiary.

We have held several virtual group meetings with Schwab trust representatives to discuss the process, and those meetings went well with all questions answered to satisfaction. We are now in the process of getting the current bank trust department to agree with the planned move, and once that step is complete, we will then go back to her trust and estate lawyers to complete the process.

So far, Schwab feels like a reasonable option, and definitely they are the lowest cost among all of the reasonable options that we found.

[FIREshrink]

I am also wondering about an irrevocable trust. If I have money I don't need, why not put it beyond reach of creditors and predators?

[Gavin West]

$5,000 per year may or may not be expensive for management fees (it usually is though), but more importantly, why do you want a trust in the first place? You mentioned for gifting purposes. I can understand why you may not want to divulge in a public forum all your reasoning, but for many types of gifting trusts, 5k/yr is a lot. Professional trustees are always much more expensive than lay trustees, but depending on the trust's purpose and your situation, it can be worth the cost. You should be looking at the pros and cons of Schwab's service with the help of a good estate planner who is licensed in your state.

[Gavin West]

As to FIREshrink's question, putting large amounts of assets in irrevocable trusts can be very beneficial for asset protection, especially in states with very favorable laws. The downside is usually less control over the assets, which is the number one reason why clients choose not to. Set up and administration costs also factor in. Asset protection planning should always be done while looking at a person's entire estate plan (which includes asset management considerations all the way through- from when both spouses are alive to after both die).

[FIREshrink]

As to FIREshrink's question, putting large amounts of assets in irrevocable trusts can be very beneficial for asset protection, especially in states with very favorable laws. The downside is usually less control over the assets, which is the number one reason why clients choose not to. Set up and administration costs also factor in. Asset protection planning should always be done while looking at a person's entire estate plan (which includes asset management considerations all the way through- from when both spouses are alive to after both die).

we are subject to a pretty onerous state estate tax, and we have assets we do not need (inherited). The thought would be to contribute those to an irrevocable trust to reduce our estate size (there is no state gift tax, and it is less likely we would be subject to federal estate tax (though possible after 2025)). I understand the drawback of costs (tax prep primarily) and loss of step up in basis, though the latter may disappear by law anyway.

[afan]

I am helping an elderly relative move their trust accounts away from a very expensive bank trust department (roughly 2% per annum in total fees for a long a la carte menu of various fees, and continuously rising). We vetted new options including Vanguard and other bank trust departments, along with Schwab.

Schwab is the cheapest at 0.5% all inclusive, and they seem to offer essentially similar services in comparison with the other options. One negative factor is that Schwab may be less personal and be more of a Zoom conference relationship with the trust folks in Nevada and a more in person relationship with the Schwab investment rep in the local branch. However, saving massive amounts of fees in comparison with the big bank trust department is worth it to the primary beneficiary.

We have held several virtual group meetings with Schwab trust representatives to discuss the process, and those meetings went well with all questions answered to satisfaction. We are now in the process of getting the current bank trust department to agree with the planned move, and once that step is complete, we will then go back to her trust and estate lawyers to complete the process.

So far, Schwab feels like a reasonable option, and definitely they are the lowest cost among all of the reasonable options that we found.

Any details about how they will invest the assets?
Will Schwab put everything in a 3 fund portfolio? Avoid the large cash positions in its' Intelligent Portfolio?

[billy]

If you want everything in a 3 fund portfolio, why cant you just manage that yourself as the trustee? Or instruct the trustee to invest it in that manner if going the irrevocable route?

[afan]

There are times when one might need an independent trustee, so doing it yourself may not be an option.

For exanple, you would need someone to manage the assets for minors in an estate plan or for adults who do not pay enough attention to financial affairs. For asset protection for an individual, they cannot be trustee unless their control over distributions is carefully limited. They could manage the investment, but not discretionary distributions.

If you create a trust for someone else, they may not be prepared to manage assets themselves.

Many corporate trustees will not agree to let the grantor or beneficiary dictate how to manage the investments. They have their way of doing it and will do it that way if they are trustee.

There are arrangements one can set up where one company serves as administrative trustee but has no responsibility for managing assets. Then engage a separate company to do the investing. With a wider range of companies, you can find groups that would do a 3 fund for a low flat fee.

[White.Beard.Doc]

Any details about how they will invest the assets?
Will Schwab put everything in a 3 fund portfolio? Avoid the large cash positions in its' Intelligent Portfolio?

We have a meeting on Monday to discuss how they plan to manage the assets. We want some more specific information about the details. The intake person told us that the 27% S & P 500 ETF may be an issue, because it represents more than 10% of the investments in 1 single fund. We responded by saying that it is not one single asset, but rather 500 companies. He responded that "so much is in Apple." So perhaps 1 to 2% of this entire portfolio is in Apple, which doesn't sound like an lack of diversification to me. If Apple is 7.3% of the S and P 500, and there is 27% in that particular ETF, that represents less than 2% of the holdings. The discussion with the Schwab investment team will be interesting.

[billy]

We have a meeting on Monday to discuss how they plan to manage the assets. We want some more specific information about the details. The intake person told us that the 27% S & P 500 ETF may be an issue, because it represents more than 10% of the investments in 1 single fund. We responded by saying that it is not one single asset, but rather 500 companies. He responded that "so much is in Apple." So perhaps 1 to 2% of this entire portfolio is in Apple, which doesn't sound like an lack of diversification to me. If Apple is 7.3% of the S and P 500, and there is 27% in that particular ETF, that represents less than 2% of the holdings. The discussion with the Schwab investment team will be interesting.

You can blow their minds by offering 9% s and p 500, 9% large cap index fund, 9% total stock market index instead

[afan]

Agree, does not sound like that comment came from someone who had any idea what they were talking about. Hopefully, not someone who makes investment decisions.

Also illustrates that it is not so simple to "tell" the trustee how to invest.