Gift trust turned Mutual fund--need help! - Mothering Forums

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#1 of 15 Old 10-02-2009, 04:55 PM - Thread Starter
 
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Dh just got a letter from Ameriprise. His mom had set up a gift trust for him that would be turned over when he turned 25. Well, he did, this past month. They said he had to turn it into a mutual fund in order to avoid some complicated IRS thing (not too clear on that). Anyway, the money is his. It's a lot less than his mom has put into it all these years (thanks stock market crash). However, it's a nice chunk of change--about 6k.

Should we pull it out & into savings? Should we leave it in?

After last years stock market fiasco and things still looking pretty bleak (jobless recovery--how does THAT work?), I'm worried about the stability of a mutual fund, right now.

WWYD?

Ami

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#2 of 15 Old 10-02-2009, 10:08 PM - Thread Starter
 
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No thoughts? Leanings?

I want to pull it, but only because I'm afraid of the losing a good portion of the money. It won't 'hurt' us, but it will hurt me mentally to think I could have kept all that safe.

ETA: Dh wants to keep it there because mutual funds are 'safe'.

Am I being irrational?

Ami

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#3 of 15 Old 10-03-2009, 12:33 AM
 
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We don't do mutual funds. Most, I believe, are uninsured. You could lose depending on what the market does. Plus, they're not that much "fun" if you want to play the market yourself.

We do have stocks and do play the market. So, I guess it's just one of those situations that you choose based on your comfort level. I realize that's probably not that helpful!

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#4 of 15 Old 10-03-2009, 12:57 AM - Thread Starter
 
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Originally Posted by Sailor View Post
We don't do mutual funds. Most, I believe, are uninsured. You could lose depending on what the market does. Plus, they're not that much "fun" if you want to play the market yourself.

We do have stocks and do play the market. So, I guess it's just one of those situations that you choose based on your comfort level. I realize that's probably not that helpful!
Ok, that helped! Now it makes me want to take it out even more!

I don't mind stocks, just that at this point in our lives, 6k is nothing to sneeze at. We can get by without it, but the thought of losing it all.

ETA: Can you tell I'm not a gambler?

Ami

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#5 of 15 Old 10-03-2009, 01:37 AM
 
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If it was me, I'd probably leave it in or perhaps take half out and leave the rest in, especially if you can live without it. Chances are pretty good that in the next 10 years or so the markets will go up a fair bit and you won't end up losing it all. I'd make sure that it wasn't in an extremely risky/volatile fund and then just wait till the shares come back up in price.

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#6 of 15 Old 10-03-2009, 09:19 AM
 
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I'm not sure exactly how this is set up, but I'll try to help with the complicated "taxes", which I don't think are going to be all that complicated. It doesn't really matter what the money has done prior to your dh getting it. At this point, your dh is going to be gifted $6,000 from his mother. She can gift up to $13,000/year without any gift tax penalty. You will have to declare it on your taxes, but any good tax program will lead you by the hand on how to file it properly. You won't pay gift tax on it, though. It may just mean a couple more forms to file at tax time, but not overly complicated.

I am exactly the opposite of Sailor. The market is to build wealth over the long term. It's not a game, IMHO. Playing with it is what got this economy into the mess we're in now. Gambling is what stock trading is. Mutual funds are managed by professionals who do this every day, usually 10 hours/day. You do *not* want to piddle around in stocks. If you want to put it into a good, no-load, low-fee mutual fund, look at Vanguard. A mutual fund can be a BOND fund, too, instead of an equity (stock) fund. You can invest in gold through a mutual fund. You can invest in cash. There are many ways to invest and diversify through mutual funds. And if you're just fiddling around with stocks, you're not diversified... you've put all your eggs into one basket (all equities or stocks and no other investment vehicles). The stress is not fun at all, IMO, and not worth it.

That being said, if you want to save your money instead of invest it (get a guaranteed, albeit small, return) with no stress... look into taking it out and putting it into a tiered CD schema. $2000 in 6-mo CD, $2000 in 1yr CD, $2000 in a 2 yr. CD. As each mature, take out the money if you need it or reinvest. It is FDIC insured, although I would not rely on the FDIC always being solvent over the next 10 yrs or so. If you don't want it tied up for even 6 mos. at a time, a good money market mutual fund, which is FDIC insured, like Vanguard's Prime Money Market Mutual Fund would be a good thing to look at. JMO.

Good luck!
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#7 of 15 Old 10-03-2009, 04:15 PM
 
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I'd put it into low risk funds. This way you can still earn more than in a savings account but be safer. And with the economy slowly recovering, this is the time to invest IMO, as things will be starting to come back up.
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#8 of 15 Old 10-03-2009, 05:01 PM
 
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ITA with Velochic! I would only add a few qualifications. If you have student loan or high interest debt, I would pay that off first. If you haven't already maxed out your retirement and you qualify based on income, I would put the money into a Roth IRA first and then select whatever investments. On balance, your entire portfolio should reflect the level of risk you are comfortable with, which sounds like very little. But, any given portion doesn't have to.

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#9 of 15 Old 10-04-2009, 03:12 PM
 
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I would leave it in and forget about it unless you *really* need it right now. We have IRAs in mutual funds, and while yes, they absolutely DID loose money the last few years, I do believe they will still be there when we retire in 30+ years. We also have $$ in tiered CDs like Velochic stated above, and I think that is a great way to keep saving $$ and making a small amount on interest, I just wish we could get more interest! Honestly $6K isn't THAT much $$, but you want to keep it saved, and not spend it. The CDs make it easier to spend it when they come up every few months (Mine are set where one renews every 2 omnths or so, and they are 6 month to one year CDs). Leaving it in a Mutual fund will make the $$ harder to get to, but not impossible.
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#10 of 15 Old 10-04-2009, 04:38 PM
 
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Quote:
Originally Posted by JTA Mom View Post
Dh just got a letter from Ameriprise. His mom had set up a gift trust for him that would be turned over when he turned 25. Well, he did, this past month. They said he had to turn it into a mutual fund in order to avoid some complicated IRS thing (not too clear on that). Anyway, the money is his. It's a lot less than his mom has put into it all these years (thanks stock market crash). However, it's a nice chunk of change--about 6k.

Should we pull it out & into savings? Should we leave it in?

After last years stock market fiasco and things still looking pretty bleak (jobless recovery--how does THAT work?), I'm worried about the stability of a mutual fund, right now.

WWYD?

Ami
Is the complicated IRS thing that it is currently in an IRA? If so that really is a complicated IRS tax thing...even if he turns it in a mutual fund...

I have btdt...

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#11 of 15 Old 10-04-2009, 06:33 PM - Thread Starter
 
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Originally Posted by BathrobeGoddess View Post
Is the complicated IRS thing that it is currently in an IRA? If so that really is a complicated IRS tax thing...even if he turns it in a mutual fund...

I have btdt...
Still looking into that. I don't think it's complicated to file, just that if we didn't turn it into a Mutual fund, THEN it would get complicated IRS stuff.

We have no debt other than $500 left on our car loan. That's it. No student loan debt, no cc debt, nothing. About 2 yrs ago we went hardcore on our debt, so now we have almost nothing on that end.

Unfortunately, we really don't make enough to fund retirement accounts, etc, at least for right now. Dh is trying to change careers and I'm looking for a job, but for right now, there is no $$ for it. Also, my family suffered a huge loss this summer with my aunt passing away. Long story short, we are helping out our family financially through this time. It's not much, but it is the difference between them going hungry or not. So any 'extra' money is no longer extra.

It's also why I'm jumpy about 'losing' any of that money. We won't spend it right now, but within 10 years? I don't know. Especially with the economy being all shaky, I'm not sure about it. I can put it in a CD--I was thinking of plopping it into my ING account. It's making about 1.3% interest (ugh used to be 4%!). From what I've seen, CD's aren't much better, are they?

Also, I know right now is a good time to invest. I'm just not sure if we've hit the 'bottom' yet. And if we had enough money to 'play' with in a mutual fund, I'd definitely let it go. But the thought of losing a good chunk of it.

Dh isn't convinced though to take it out. Maybe I'm just being a bit too jumpy. Maybe a CD would be a better compromise. Any good rates out there?

Ami

Wife to dh, Mommy to my heavenly angel, J (06), and my earthly angels, S (07) and E (10)

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#12 of 15 Old 10-04-2009, 10:02 PM
 
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I would be wary of Ameriprise... no real reason- just a feeling I get, they they sell certain things hard to make the most profit. Maybe someone else whith actual direct knowledge about Ameriprise can offer a more educated opinion.

I would talk to someone at Vanguard or Fidelity about tranferring it to a mutual fund or S&P 500 index fund account, if it was me.

Personally, I would feel pretty safe with a mutual fund, however they usually own such low interest that it seems like a waste. If I am going to take any risks I would put my money in and S&P500 fund, and if I didn't want to take any risks, I would put it in our online savings acount and get 1-4%.

In a case like this, DH and I would probably decide to split the money if we disagreed. Half to the stock market and half to savings.

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#13 of 15 Old 10-05-2009, 12:03 AM
 
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See, for us, it is also about building wealth over the long term. (As opposed to gambling - I do that with poker. )It's just that we don't trust anyone else handling our money. So, mutual funds don't do it for us as we don't have enough control over our money.

Whereas if we're in control and can buy this stock or sell that stock ... we breathe SO much easier. You can do long term stock investments, depending what you choose, and how you decide to build your portfolio.

The only person we trust is our accountant, and only for taxes.

But, of course, this will vary by the individual. We're sort of weird, I guess. It does take time to learn about all this, and I guess that's why there are professionals for it!

Definitely, if you don't want to take any risks with it - an interest earning savings account is about as safe as you can get.

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#14 of 15 Old 10-05-2009, 12:29 AM
 
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We have some money in both mutual funds and a CD. This covers us in two ways. The mutual funds will hopefully help us out in another thirteen years when DD is ready for college. For awhile before the market crashed, our funds were earning lots of money for us, and I have confidence that over the next decade they will earn briskly, maybe lose some, but likely end up being a good choice for us. My dad is very active in the stock market and is confident that this is a good choice for people like DH and me, who don't want to play the market.

But the CD is there for us, earning a bit of money and causing us no heartache right NOW. I like knowing that if we were in a dire situation, we could dip into that money and expect it to be there. The gains from it aren't nearly as large as some of our mutual funds gains have been, but we also don't feel we risk losing a bunch of it, like we did with our mutual funds. We went from $24,000 to $18,000 in a very short amount of time, and if we had plans for that money soon, it would have been a very depressing situation.
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#15 of 15 Old 10-05-2009, 11:00 AM
 
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Honestly if it were me, I'd pull it out. The past 3 years have really done a number on a lot of people and their accounts and plans, and I don't think the worst is over yet. I'd pull it out and put it in CD's for the next 2 years then put it back into mutual funds once things are really starting to rebound a bit. $6000 isn't a lot of money when it comes to investing and that seems like it would be easy to lose.
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