What do banks do with money being held in a trust?

[Krinkov58]

I am the sole living beneficiary of a trust, established by my father, which is being held and administered by a well-known bank...upon my death, any remaining assets of the trust are to be divided between two Ivy League schools my father attended and the trust dissolved. The bank deducts about $20,000 per year in fees from the balance of the trust...obviously the trust does not just consist of cash in a savings account; it owns stocks, bonds, etc. So there is some investing going on to justify the $20,000 in fees which the bank collects although lately this bank has become rather adept at losing money.

So what is the bank doing with this money, anyways?

I've noticed sometimes large amounts of money disappearing...for example, over $200,000 disappeared between the 3rd and 4th quarter in 2018 and more recently, over $300,000 was lost between the 4th quarter of 2019 and the 1st quarter of 2020. This bank routinely pays out more in fees and miscellaneous disbursements that it pays out to me...honestly, since 2015 it seems as if this bank spends more and more of it's time trying to come up with ways to evade the execution of the trust than actually executing the trust itself. It's gotten to the point where I only contact the trust manager maybe 2 or 3 times annually because it is such an unpleasant experience, and even then it can take a week for a response (or sometimes there will be no response at all). Is this a common thing when dealing with banks that are handling a trust fund?

 

[bcr229]

As a beneficiary you are entitled to statements about how trust funds are invested. Are you not getting these?

All of the markets took a hard hit between Jan 1 and Mar 31 due to COVID, which likely accounted for the loss you noted.

 

[Just Blue]

https://forum.freeadvice.com/threads/trust-question.658460/#post-3682324

More information on the trust can be found on OP's other thread on this topic.

 

[Krinkov58]

Bcr229, I do receive quarterly statements as to what is sold and what is acquired etc. but my question is more to the point of, do these banks profit from these trades outside of just the fees they charge the trust balance? And is it common for banks to attenuate access to the trust by beneficiaries?

Just Blue yes I've posted issues I've been having with this particular branch of the bank before...

 

[adjusterjack]

After losing hundreds of thousands of dollar, you really, really, need to get a lawyer to go after these people and find out why.

 

[Krinkov58]

After losing hundreds of thousands of dollar, you really, really, need to get a lawyer to go after these people and find out why.

I'm kind of thinking the same right now, I just don't have the money to retain an attorney. The trust has plenty of money but I am living extremely modestly.

 

[TrustUser]

i havent dealt with a bank in 30 years. many are crooked as hell. my experience with professional trustees is piss poor, from what i can tell. if you have any power to appoint the trustee, i would make that change ASAP

 

[Krinkov58]

i havent dealt with a bank in 30 years. many are crooked as hell. my experience with professional trustees is piss poor, from what i can tell. if you have any power to appoint the trustee, i would make that change ASAP

I have exactly zero power at all whatsoever in that regard, unfortunately.

 

[TrustUser]

that is also the time when professional trustees are most apt to be crooked - they know you dont have any control of the situation. hopefully some of the others here on the site can be helpful with possible avenues for you. good luck.

 

[Just Blue]

I have exactly zero power at all whatsoever in that regard, unfortunately.

The bank is in Massachusetts, correct?

If so, contact the Mass Bar and ask for referrals to several Trust Attorneys. You should be able to get a reduced fee consult, with one or more of the referrals....explain the situation and see where you should go from there.

I seem to remember reading here that the trust would pay for the attorney if there are issues, but I'm not sure. I will tag 2 of the attorneys that volunteer here.

@Mass_Shyster @Taxing Matters

 

[Krinkov58]

The bank is in Massachusetts, correct?

If so, contact the Mass Bar and ask for referrals to several Trust Attorneys. You should be able to get a reduced fee consult, with one or more of the referrals....explain the situation and see where you should go from there.

I seem to remember reading here that the trust would pay for the attorney if there are issues, but I'm not sure. I will tag 2 of the attorneys that volunteer here.

@Mass_Shyster @Taxing Matters

The bank branch I deal with is in Concord, New Hampshire, but the trust is based out of Massachusetts (pays taxes there etc.) and I live in Maine...I am thinking of moving back to MA just to be able to deal with a MA branch again instead of the NH branch.

The manager of the Portsmouth, NH branch of this bank just got sentenced to 2 years in prison for stealing clients money.

 

[bcr229]

Bcr229, I do receive quarterly statements as to what is sold and what is acquired etc. but my question is more to the point of, do these banks profit from these trades outside of just the fees they charge the trust balance?

Maybe. I will give you an example from a trust where my mom was a beneficiary; I found the statements in her files after she passed away. The trustee was the bank so it took a percentage for trust maintenance, but it also invested all of the trust assets into its own high-load (2.5%!) mutual finds. So you would have to look at the overall portfolio to see what the bank is truly "making" on the trust.

And is it common for banks to attenuate access to the trust by beneficiaries?

I have no idea what this means.

WRT the $300,000 loss in the first quarter of this year, that depends on what percentage of the trust value it represents. If there was $1 million in the trust on Jan 1 then I'd be furious. If there were $10 million in it then that's an acceptable loss given the economic downturn. My own IRA and 401k both lost about 25% and I had to keep telling myself those were just paper losses, even if the paper has pictures of dead presidents printed on it.

 

[Krinkov58]

Seems to me that the bank is using the money to play around in the market and make money for the bank, honestly...it's not benefitting the market value of the trust nor is it benefitting me. Although literally the name of the trust is "For Benefit Of" my name. Not "For Benefit Of" this particular bank.

I'm asking, is it common for banks acting in the capacity of trustee to limit access to the trust...in 2009 for example, I'd just call the trustee I was working with and ask for something, he mildly bitch about it and tell me to email his assistant about it and it was taken care of that day, if not within 24 hours. As it stands now, there is a trust committee which only meets twice a month to approve requests...and a recent change has stipulated that I can only make one request per meeting. Meaning that if I have for example, 3 medical bills...it could be two months before they will review all of them depending on when the last meeting was. So I kind of stopped bothering. And the $300K loss was to a $2.1M trust...not an insignificant loss.

 

[adjusterjack]

The stock market lost about 25% of its value between the end of Feb and the end of Mar. If the trust was worth $2.1M at the beginning of 2020 losing 15% by the end of the first quarter was doing better that the over all market and should have been regaining value starting the end of march. You can't look at just losses for any particular periods you have to look at the over all performance. Are you just tunnel visioning the losses or have you looked at any recovery after the losses?

 

[Krinkov58]

The stock market lost about 25% of its value between the end of Feb and the end of Mar. If the trust was worth $2.1M at the beginning of 2020 losing 15% by the end of the first quarter was doing better that the over all market and should have been regaining value starting the end of march. You can't look at just losses for any particular periods you have to look at the over all performance. Are you just tunnel visioning the losses or have you looked at any recovery after the losses?

The losses, historically have been regained over time. And re-lost. From 2007 until 2015 the trust market value grew at almost a right angle on a graph...since 2015 it has not grown past where it was when the New Hampshire branch took over. It might lose money, gain some back but never to the point where it exceeds pre-2015 value.