Got a call from my brother, who is co-trustee of a non-revocable trust FBO my mother (85 y.o.).
The financial advisor (fee based, not fee only) who manages the trust along with my mother's other accounts (revocable trust and rollover IRA) is recommending they sell some of the equities (mostly precious metals and energy related) and put the proceeds into a REIT. (The advisor apparently did state up front that it's a riskier investment than anything my mother's invested in previously.)
Given my mother's age and risk tolerance, my gut says, "Ain't no stinkin' way," but I'm willing to listen to an argument for why it could be an appropriate investment. (I would note that my mother does not need to draw from the non-revocable trust to meet current or projected future expenses.) On the face of it, though, it strikes me as a reach.
We (brother and I) will be meeting with the FA next week to hear him out. Any specific questions we should be asking or red flags we should be listening for?
Thanks.
Comments
You need to operate under the terms and objectives of the trust. For example, you write that she doesn't need any of the trust - even its income - to meet projected expenses. So what's the purpose of the trust - to leave a legacy, to provide her mad money, or ...? If she doesn't need to draw on the trust, what is the significance of her age?
Is the trust required to distribute property to your mother? Often trusts are required to distribute income, but not capital. Just tossing this out as an example. If that were the case, then given that your mother doesn't need the money, it might make more sense to keep the trust invested in non-income producing property, so that the money stayed in the trust.
Irrevocable trusts are often used for tax reasons - to circumvent estate taxes. (By periodically gifting money to the trust, one can preserve the full estate tax exemption. Or by gifting a large amount many years before death, the growth over the subsequent years is kept out of the estate.) This may suggest the purpose of the trust is to leave a legacy. But there could be other reasons for this trust.
In short, the first question is not what your mother needs, but what are the requirements of the trust. It's only against those requirements that the suggestions of your advisor can be evaluated.