All UITs have fees and expenses. These costs, like all investing costs, are important to understand because they affect the return on your investment. UIT fees and expenses can be divided into those fees that relate to distribution of the UIT and those that relate to operation of the UIT.
Management fees: Investment trusts charge a management fee, which covers the costs of managing the trust's investments. This fee is usually expressed as an annual percentage of the trust's net asset value (NAV)
Ongoing Charges (previously Total Expense Ratios or TERs) is a figure published annually by an investment company which shows the drag on performance caused by operational expenses.
The annual expense ratio is usually between 0.5% and 1% of the invested assets.
For portfolios with a $100,000 value, a 1% annual fee can reduce that value by as much as $30,000. “The average investor pays from approximately 1.5% to 2% annually,” says Stuart Boxenbaum, CFP®, investment advisor and president of Statewide Financial Group.
Choosing low-cost mutual funds, going with passive investments like an ETF or an index fund, and being aware of how much you are paying in fees can go a long way toward reducing the amount you pay to invest.
Many financial advisers charge based on how much money they manage on your behalf, and 1% of your total assets under management is a pretty standard fee.
A trust can be an extremely useful estate planning tool if you have a net worth of $100K or more, have substantial real estate assets, or are planning for end-of-life.
Suze Orman, the popular financial guru, goes so far as to say that “everyone” needs a revocable living trust.
Revocable Trusts
Commonly referred to as living trusts, revocable trusts offer an effective estate-planning tool to lower the costs and hassles of probate, preserving privacy and preparing your estate for ease of transition in the event of death or incapacity.
Generally, the fees are taken from any income generated, but if there is not enough income to cover ongoing charges then the fund manager will take its fees out of a fund's capital.
Fees typically come in two types—transaction fees and ongoing fees. Transaction fees are charged each time you enter into a transaction, for example, when you buy a stock or mutual fund. In contrast, ongoing fees or expenses are charges you incur regularly, such as an annual account maintenance fee.
An exit fee is a fee charged to investors when they redeem shares from a fund. Exit fees are most common in open-end mutual funds. Class C-shares are classes of mutual fund shares that carry annual administrative fees, set at a fixed percentage.
It is free to hold investment trusts within the HL Fund and Share Account. The annual charge to hold investment trusts in the HL ISA or SIPP is 0.45% and 0.25% in the HL LISA (capped at £45 p.a. in the ISA and LISA and £200 p.a. in the SIPP).
Unlike mutual funds, investment trusts can take on gearing, or borrowing additional money for investments, which unit trusts are not allowed to do. That means they can take bigger risks, meaning potentially bigger rewards or potentially bigger losses.
To avoid probate on brokerage accounts, you must create a trust or fill out a TOD (transfer on death) form to transfer the money directly to your beneficiaries. It is generally better to retitle your investment accounts to your trust during your lifetime rather than rely on a TOD to transfer your accounts at death.
Do I Need a Living Trust? While there's not a one-size-fits-all answer, the vast majority of people can get by without using a living trust. Dave Ramsey says, “A simple will is perfect for 95% of the population.” In other words, unless you have a really big estate, a simple will works just fine.
This term refers to a Trust agreement that allows Beneficiaries to withdraw $5,000 or 5% of the Trust's assets annually, whichever amount is greater. This tool is designed to provide the Beneficiaries with a certain level of flexibility and control over the Trust, without compromising its overall intent or structure.
A living trust can help you manage and pass on a variety of assets. However, there are a few asset types that generally shouldn't go in a living trust, including retirement accounts, health savings accounts, life insurance policies, UTMA or UGMA accounts and vehicles.
Flexibility and control: Trusts provide more flexibility and control than wills. A will declares who you want to receive specific assets, and you have limited control over when the beneficiary receives them due to the probate process.
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.