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Dissolving Ric-E Trust

Bogleheads • View forum - Investing - Help with Personal Investments - www.bogleheads.org
How does the expression go, “bless her heart...”

I am very close with my mother and love her dearly. One thing I am most appreciative of is that she instilled in me the virtues of saving money. When my high school friends were using their summer earnings to buy their first car, my mom convinced me to open a Roth IRA. In terms of her savings habits, she is a true Boglehead. Unfortunately, she was not a Boglehead with an investment decision she made in 2000.

A couple years ago she told me that when I was a teenager she had opened a trust in my name for 20k. Whoo-hoo! Who doesn’t love a 20k windfall? That was the good news. However, I soon learned the trust was a very specific, Ric-E Trust, designed by Ric Edelman, and when I learned the details I wanted to throw-up.

This is how the trust works as far as I understand. I do not receive the money until I am 59 1/2. Even though I am no longer a minor, I cannot change the funds in the trust. Only an appointed trustee can act on my behalf, though I can choose who this individual is. Originally this person was my mom, but we decided it made sense to change the trustee to someone closer to my age, so my best friend is now the trustee.

My best friend obviously doesn’t care what funds are in the trust and will act on my behalf. The problem is the trust, now held by Sun America, is composed of three actively managed funds with high expense ratios. According to Sun America I can only change the allocation to other Sun America funds (which are all also actively managed). In addition, Sun America charges a .5% maintenance fee each year. So essentially, every year I am losing about 1.25% on my investment, which obviously adds up to a ridiculous amount of money over time – case in point, the trust is only worth 26k today. I’ve considered running the numbers until my retirement, but it’s just too depressing.

Given how much I stand to lose over the next 35 years in compound returns, I’ll do just about anything to transfer the trust to a financial institution with a lower operating fees and/or a selection of low-cost funds (Vanguard would not hold the Ric-E Trust when I inquired two years ago). Alternatively, I'd also happily dissolve the trust entirely, just about regardless of the penalties I might incur. However, I do not think transferring or dissolving the trust is a possibility. I have also thought about hiring some type of legal counsel.

I’m writing this post to see if anyone can help. Does anyone have experience with the Ric-E Trust? Is there a possible solution, or am I just resigned to paying Ric Edelman and large corporations tens of thousands of dollars in fees over the next 30 years…
Date: Apr 19, 2017   


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