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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 10:59 am 
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Eagle wrote:
Church bonds are bonds issued by churches or religious institutions. My grandparents and parents have invested in these with a bit of success over the last few years.


Just a comment -

Church bonds are not required to have SEC registration but they may have it.

I would absolutely NEVER buy an investment that does not have SEC registration. There is no excuse for that. If you want to make a donation to a church then that's fine. But buying an unregistered bond is stupid, even if it is for a church. There have been LOTS of scams through the years related to church bonds. You should not put your family's money at risk on unregistered investment products.

Now, if you can find church bonds that ARE registered with the SEC, that's a different situation. They could be of interest IF they are adequately collateralized and scrutinized by analysts.

Edit: Church bond default rates have historically been about 1%, that is high compared to corporate bonds and puts them solidly in the junk category. They are currently over 10%! You have a 10% chance of losing ALL of your money in a single bond. I think most people would find that intolerable.

Don't take this as an attack on your religion. I see nothing wrong with donating to a church outright. But if you are making an investment you should stick with registered investment products.


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 12:53 pm 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
hold on there lil' britches.

Is this money you hope to use one day for the purchase of a home? The real meat of the matter is, is preservation of capital important to you over the next 5-10 years?

For any amount you want to enter the market, you will want to look at tax efficient placement of your funds. This basically means you should hold your bond allocation in your 401k and Low turnover funds (or ETF's)/international funds in your taxable accounts. So, to answer the question about the single fund, NO.

I personally think a good bulk of everyone's e-fund should be in 5 yr CD's (with low early redemption penalty) and i-bonds.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 1:16 pm 
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Posts: 1107
Thanks for the thoughts and the insights. I apologize ahead of time for my lack of knowledge on the subject of investments. This is actually the main reason I joined the GRS forums. :clap:

DoingHomework wrote:
(A) She should be able to go to your bank, get a Medallion guarantee from an officer, and send that along with proof of age to UBS/Fidelity/Vanguard, and get the name on the account changed. She might not be able to add you in one step. They might want to put it solely in her name then make it joint in a separate action.

(B) There should be no reason for him {wife's uncle} to travel. You should be able to take care of the entire transfer by mail. He might need to get a signature guarantee or notarization but that is it. We have done this several times.

C. Also, see above, if this is an UGMA account and she has reached the age of majority she can probably do this without his involvement although you should inform him as a courtesy if he is the custodian.


I. Plan of action:

1. Call each company to find out how each investment is set up.

I will need to contact Fidelity and Vanguard to ask them more questions. It seems the first thing I should’ve done is seen how the accounts were set up. As far as I know there is no trust. My wife’s father managed all this (investments specifically) for her before we were married. Perhaps I need to pick his brain.

2. Change the name on the accounts to reflect wife’s current married name. (A)

3. Research the "perks" that each investment firm offers to see if anything appeals to us. Look into Fidelity, Vanguard, & T. Rowe Price.

4. Look at either transfer of funds or consolidating into one open account
If closing the accounts determine whether to do it via a) Check b) Electronically (B) & (C)

We honestly don’t want to pay anything extra. The reason why I’m a little stuck on this physical check issue is we may want to invest a portion of the money into different types of investments such as bonds, CD’s, etc. I cashed out an investment via check with Edward Jones a few years back and it worked just fine.

I guess that was a risky thing to do?


II. Questions to ask UBS, F, V:

1. How is the account set up? Will there be any fees associated with closing the account?
2. Is this an UGMA account?
3. Would we qualify for an Admiral Account with Vanguard?
4. Is there a "transfer concierge" that is available to help us?

Anything that I missed and should ask?

DoingHomework wrote:
Is there some place that has a UTA and a date after it? Does Tim Jones' name appear as TTEE?


What is a UTA? What is TTEE?

DoingHomework wrote:
Church bonds are not required to have SEC registration but they may have it.

I would absolutely NEVER buy an investment that does not have SEC registration. There is no excuse for that.

Now, if you can find church bonds that ARE registered with the SEC, that's a different situation.


What does a SEC registration guarantee? I spoke to my parents today and they informed they have two investments through church bonds – one for 2K that pays 5% for 9 years and another for 5k that pays 7% for 9 years. They are different churches. Is/was this a good investment? I’m going to talk to them more about this tonight.

Bichon Frise wrote:
Is this money you hope to use one day for the purchase of a home? The real meat of the matter is, is preservation of capital important to you over the next 5-10 years?


With our current situation of a 2 bedroom 2 bath apartment including utilities being free… I don’t foresee us buying a home in the near future. 10 years down the road that may change. In that case we probably would buy the home cash. It also depends on what happens to my wife’s parents house, the health of both sets of parents, how many children we have, etc. in that time frame.

Bichon Frise wrote:
I personally think a good bulk of everyone's e-fund should be in 5 yr CD's (with low early redemption penalty) and i-bonds.


Okay what returns can one expect on 5 year CD’s?

What are i-bonds and how do they work?

_________________
~ Eagle


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 2:22 pm 
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Posts: 5395
Eagle wrote:
I. Plan of action:

1. Call each company to find out how each investment is set up.

I will need to contact Fidelity and Vanguard to ask them more questions. It seems the first thing I should’ve done is seen how the accounts were set up. As far as I know there is no trust. My wife’s father managed all this (investments specifically) for her before we were married. Perhaps I need to pick his brain.

2. Change the name on the accounts to reflect wife’s current married name. (A)

3. Research the "perks" that each investment firm offers to see if anything appeals to us. Look into Fidelity, Vanguard, & T. Rowe Price.

4. Look at either transfer of funds or consolidating into one open account
If closing the accounts determine whether to do it via a) Check b) Electronically (B) & (C)

We honestly don’t want to pay anything extra. The reason why I’m a little stuck on this physical check issue is we may want to invest a portion of the money into different types of investments such as bonds, CD’s, etc. I cashed out an investment via check with Edward Jones a few years back and it worked just fine.

I guess that was a risky thing to do?


The trouble is, checks can be stolen or intercepted in many different ways. They can be "washed" for example. It is probably a small risk but not zero. It's generally a bad idea to send a large check through the mail. If you do a direct transfer between financial institutions it will go by Fedwire very safely.

Honestly, I think you will have problems if you get a check because it will be made out to your wife only and might be difficult to deposit in a joint account. But it really depends on a lot. I actually can't understand why you would not want to do a direct transfer.

You best bet would be to transfer directly to V F or TRP and then have them send you a check for anything you want to put in CDs or whatever.

Eagle wrote:
II. Questions to ask UBS, F, V:

1. How is the account set up? Will there be any fees associated with closing the account?
2. Is this an UGMA account?
3. Would we qualify for an Admiral Account with Vanguard?
4. Is there a "transfer concierge" that is available to help us?

Anything that I missed and should ask?


That's a good start. But you might talk to each company and go with the one most willing to give you the help you need. They are there to help you, answer your questions, and explain anything you don't understand. Don't be afraid to ask stupid questions.

Eagle wrote:
DoingHomework wrote:
Is there some place that has a UTA and a date after it? Does Tim Jones' name appear as TTEE?


What is a UTA? What is TTEE?


If the account is a trust then the registration will be something like "The Minnie Mouse Revocable Trust UTA DTD 5/12/1987 Tom Jones TTEE, FBO Erika Smith" which means it is a revocable trust called the "Minnie Mouse Trust" Under Terms Agreed (UTA) Dated (DTD) 5/12/1987. The Trustee (TTEE) is Tom Jones who runs the trust for the benefit of (FBO) Erika Smith who is the beneficiary. I might not have that 100% precisely right but that is the general idea (maybe bpqui will correct). The point is, if you see a registration like that then it is a trust and the company will have on file a certificate of trust existence and authority that it uses to verify that the person trying to make a change actually has the authority.

With a custodial account established for a minor under the UGMA, the rules are prescribed by law so they only need to confirm that the minor is over the age of majority, so it is simpler.

It is also possible that the money is simply in your wife's name and is not even a custodial account at all. Or it could actually be a joint account with her uncle in which case you will need his signature to remove him (and the removal might constitute a taxable gift). You can recognize a joint tenancy registration usually by the abbreviation JT or JTRS on the registration

You are going to run into another minor issue but I want to explain what is happening in case you do.

The money right now is in your wife's maiden name. It is money she had before the marriage. You are not legally entitled to it and the financial firms have a fiduciary obligation to protect her from you:

They will likely require that the account first be put in her name only and converted to an individual account rather than a custodial account. She will need to sign her maiden name to do that.

Then they will let here change the name on the account by showing a marriage license and probably filling out a form on which she signs her maiden name and married name. They might also require an affidavit swearing that Erika Smith and Erika Jones are one and the same person. That affidavit will probably only have to be notarized, possibly with witnesses.

After that they will likely have her transfer the money into a NEW joint account.

Each of these steps may or may not require new paperwork. We have done this a few times in our going on 25 years together and the steps always vary with company. My wife actually still has stuff in her maiden name because one company was such a pain about making a change that we just gave up because it didn't really matter.

I recall Vanguard being particular obtuse about something when we set up a living trust about 5 years ago and they screwed up the same paperwork 3 times. But I don't remember exactly what the issue was. But as others have said, any company can do this.

In my experience, this whole process can go very fast or glacially slow. You have to be a little bit patient and do exactly as you are told. They should give you clear instructions. But in your case you are actually trying to do several different things - removing a custodian, creating a new individual account, creating a new joint account, and transferring to a new firm so you should not be surprised if they want to do it all serially and it takes some time and there might be some confusion along the way. Blame the lawyers!


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 2:35 pm 
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Posts: 5395
Eagle wrote:
DoingHomework wrote:
Church bonds are not required to have SEC registration but they may have it.

I would absolutely NEVER buy an investment that does not have SEC registration. There is no excuse for that.

Now, if you can find church bonds that ARE registered with the SEC, that's a different situation.


What does a SEC registration guarantee? I spoke to my parents today and they informed they have two investments through church bonds – one for 2K that pays 5% for 9 years and another for 5k that pays 7% for 9 years. They are different churches. Is/was this a good investment? I’m going to talk to them more about this tonight.


What does SEC registration mean? Well, I'm not sure what you mean by your question so I'll give you several answers.

In principle it means that the issuer (church or investment bank they hired) has carefully prepared a document that outlines all the details of the bond like the source of funds for repaying it and that kind of thing and has complied with various laws. It also usually means their books have been audited.

In practice, the SEC does not have the resources to check up on every single issuer so it might not mean much.

But I think the registration document at least is useful to tell you where they are getting the money to repay you and what they think could happen. If they are paying you back from the offering plate then what will happen if the pastors has a stroke, no one likes the new guy, and offerings dry up? It happens all the time. If their source of funds is the weekly bingo game, what's going to happen if bingo is banned? No matter how much you trust the church, you'll still want to make sure they have a sound financial plan for paying you back.

I guess the main point is that if you are making an investment then you should approach it like any other investment and do your due diligence to understand the risks you are taking. If you think there is no risk then you have not done enough research! If you are making a donation then don't even bother with the bond. Does that make sense?

Quite frankly, and this has nothing to do with my religious beliefs, if I had $2000 I was willing to put at risk for a mere $100 per year for 9 years I am quite sure I would just donate the $2000 instead. That way, if something bad did happen I would not fee so bad about the loss. You'll never miss the $100 a year anyway!


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Tue Jul 10, 2012 4:11 pm 

Joined: Mon Feb 07, 2011 6:33 pm
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Location: Illinois
Quote:
If the account is a trust then the registration will be something like "The Minnie Mouse Revocable Trust UTA DTD 5/12/1987 Tom Jones TTEE, FBO Erika Smith" which means it is a revocable trust called the "Minnie Mouse Trust" Under Terms Agreed (UTA) Dated (DTD) 5/12/1987. The Trustee (TTEE) is Tom Jones who runs the trust for the benefit of (FBO) Erika Smith who is the beneficiary. I might not have that 100% precisely right but that is the general idea (maybe bpqui will correct).

You got it right. I always read UTA as "Under Trust Agreement", but either works. You may also see U/W Mickey Mouse which would be a trust created Under the Will of Mickey Mouse in which case Mickey is necessarily dead.

Quote:
3. Would we qualify for an Admiral Account with Vanguard?
Admiral Status at Vanguard is all dependent on the amount of money in each particular fund. They have lowered the Admiral minimums recently to $10,000.00 for most funds (compared to $3,000.00 minimum for most Investor share class funds). Some, like US Treasury funds, have $50,000.00 minimums. Some funds do not have a Admiral counterpart (like the International Value Fund). I don't think the target date funds have Admiral counterparts either, but their fees are very low anyway (0.19%)


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 Post subject: Re: Invetments & Transferring Questions
PostPosted: Sat Aug 04, 2012 1:29 pm 
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Quick update: We cashed in the UBS account. It was deposited via wire transfer on Friday.

Working on the other two.

Fidelity: Going to call the Uncle Monday and have him cash in the invesment. Either going to have Fidelity write him a check or deposit the funds electronically into his account. When we go to visit him & family for Labor day will pick up the check there. Bank Bank Manager said it would be no problem if the check were under Wife's maiden name.

Vanguard: After looking at all the options Wife agreed it would be best to just cash in this investment. Mother In Love will sign over the check to us. We will deal with this Monday.

Hope to have it all settled by the beggining/middle of September.

Looking at our options. Looks like the suggestions is either to stick it into a single mutual fund and not invest more than 10% into bonds. Any other suggestions I missed? Thanks again for the input all. ;)

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