Here's my situation:

A recently widowed mother, who has asked me to manage her finances. A previously established living trust that now requires spltting the living trust into successor trusts: one will have about $600K in assets and the other, somewhat more. I'm the trustee of both. Of course I need to look after the needs of my mother, but I the better I do at managing the trusts over the next few years, the more my sister and I will eventually inherit.

Here's the problem: There is a lot of advice on how to plan for retirement; there is plenty of info on getting started growing your own portfolio from scratch. But I haven't found very much help at all on how to deal with big sums especially with this mix of objectives. At least one "full service" broker is advising me to let him "handle it". But I wouldn't be posting messages here if I accepted his advice. So where should I look for guidance on "instant trust management"?

I think this will be a fairly common situation over the next decade when boomers begin to inherit the trillions accumulated by their WWII parents.

On Thu, 03 Apr 97 13:11:41 -0600, trmccoy wrote:
<<Here's my situation:

A recently widowed mother, who has asked me to manage her finances. A previously established living trust that now requires spltting the living trust into successor trusts: one will have about $600K in assets and the other, somewhat more. I'm the trustee of both. Of course I need to look after the needs of my mother, but I the better I do at managing the trusts over the next few years, the more my sister and I will eventually inherit.

Here's the problem: There is a lot of advice on how to plan for retirement; there is plenty of info on getting started growing your own portfolio from scratch. But I haven't found very much help at all on how to deal with big sums especially with this mix of objectives. At least one 'full service' broker is advising me to let him 'handle it'. But I wouldn't be posting messages here if I accepted his advice. So where should I look for guidance on 'instant trust management'?

I think this will be a fairly common situation over the next decade when boomers begin to inherit the trillions accumulated by their WWII parents.
>>
You're right - this will certainly be an increasingly common situation. I have been in exactly your situation for about five years and have a great deal of practical advise - too much for one message on a message board. However, let me pick out a few bits of immediate advise.
1. The basis of every investment in your father's "bypass trust" went up to the value at his death. This means that you can sell any investment in the bypass trust with little if any capital gains, if you want, or if you sell that investment at a future date, at least the capital gains will be lower. When dividing your parent's assets into the "bypass" and "survivor's" separate trusts, place assets with the highest appreciation into the bypass trust. If you are lucky enough to have chosen parents who lived in a community property state, the basis of both halves of the trust rose, and you are starting out managing the trusts at a great advantage.
2. Under no circumstances give any control of the assets to a full service broker, or anyone else! A broker "handled" the investments in the trust I manage, and he made more money than the trust did for two years until I developed enough confidence to take control of the investments. I lost a lot of money in "back end loads" when I sold all the investments and moved to a discount broker.
3. If I were in your present situation, I would sell every asset whose basis rose, (no capital gains) and park all the money in a money market account until I could educate myself and be sure I knew what I was doing! This may take months, but you'll never regret it. Start reading. As a matter of fact, one of my most valuable places of learning is right here in the Fool's School.
4. Invest enough of a portion of your mother's trust in safe income strategies, like US Treasuries or conservative muni's, to insure that she has enough income to live comfortably for her remaining years. The rest of her trust can be invested in stocks if that's what you eventually decide. Remember that your mother will be paying income taxes for both trusts; your father's taxes will be reported on an IRS form 1041, which means that the income is reported on your mother's 1040 at her tax rate. I know this is complicated, but after a time, it will become clearer. The result is that for as long as your mother lives, her portion of the trust will perhaps dwindle because of the drain of her living expenses and her big income tax burden. This is exactly what you want, for two reasons. One is that your father's trust can now grow ESTATE TAX FREE as long as his trust exixts, and when the money is eventually distributed to you and your sister, ALL of his trust will be distributed. The other reason is that it would be good for your mother's trust to be reduced, by the time of her death, to less than $600,000, so that no Federal Estate tax would be due on her trust (Federal Estate Taxes are real killers). If it appears that her estate will NOT dwindle to under the $600,000, encourage her to gift ou $10,000 each year to was many people as she wants in order to accomplish this goal.
5. Retain a really competent accountant to do the taxes each year. The expense is negligible. Also find yourself a good attorney who specializes in taxes and estates - you don't need him now, but if you ever do, you want to know where to find him (he's expensive!). You can get along fine without him now, and if you read enough, you may never need him. Your parents were clever enough to set up a living trust, which makes life much easier for the inheritors.
6. Ask me some more questions - if I can be of help, pick my brain (remember, I'm not a lawyer, but just a fortunate beneficiary like you).

I can relate to your concerns because I have a Mother who I am looking after. Also, I'm an attorney who provides care for some elderly clients who can't manage their affairs, including but not limited to their investments.

I think that you must first determine what your goals are with regard to your Mother's investments. If your goal is to manage her money so that when she dies, you and your sister have an inheritance, then obviously, you need to think in terms of growth--depending, of course, on your Mother's present health and life expectancy. If you are only thinking about using her funds for her care, then safe investments producing income make sense. I received a message from David Gardner, and he suggested that the Dow Divident approach works well for retirement investing. I would agree, depending on your Mother's health.

Wyatt

For down to earth trust and estate
info, go www.nolo.com.

I concur. Steps 2, 3, and 5 are particularly important to follow. It's very helpful to have an experienced Trust attorney who will exlain all the ins and outs and do all the paperwork correctly so as to avoid problems down the road. Never forget that your primary and most important responsibility is to your mother. God Bless her, and may she live forever and use up all the money and become a financial burden to you.

But, Heaven forbid, the unthinkable happens, be frugal so you can pass these difficulties along to the next generation.

Trmccoy
I agree with all the replies you have received. Motley Fool is a great place to get educated about investing. I also suggest you look into the American Association of Individual Investors, whose mission is investment education to facilitate beginning investors gaining confidence in managing their own portfolios. The annual membership fees are modest and they have a wealth of info on all aspects of investing.

As others have posted, your first step should be to write down your specific investing goals and decide on a portfolio strategy which fits your risk profile From what you have described it sounds as though you will have two portfolios to assemble. Go slow and be patient. For each stock or fund in the present portfolio ask yourself whether it fits the goals for the portfolio and whether you would buy it today. The temptation will be to rush through this process so you can check it off your to do list. Resist this temptation. Don't make radical changes until you are confident that you understand why each change is beneficial to the portfolio.



Bill