TrustEgg (YC W11) Launches, Lets Anyone Create Trust Accounts For Their Kids | Hacker News Reader

TrustEgg (YC W11) Launches, Lets Anyone Create Trust Accounts For Their Kids

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49 pointstwakefield41 comments

My daughter turned 1 a few weeks ago, there are a very short list of startups that I think might still exist looking a bit like they do today when she is an adult...

I cannot imagine making a 17 year bet on a startup. I like that you're all parents (+ an uncle, close enough) and actually adults rather than a crop of 20 year olds about to be acquihired, but what happens if you just stop for any reason?

Good stuff here:

http://www.investopedia.com/articles/pf/12/set-up-a-trust-fu...

And here:

http://www.investopedia.com/articles/retirement/11/ensuring-...

And yet more here:

http://www.investopedia.com/articles/pf/07/trustee-responsib...

From the website: https://www.trustegg.com/Trustegg_child_trust_fund_faqs

What happens if TrustEgg goes out of business, is my child’s account safe?

Definitely. If TrustEgg has to close its doors, or destroyed by an act of god, the underlying accounts would be transferred to another Trust Co, or the child’s parent/guardian would be named custodian. This would be done at the discretion of the State Division of Financial Institutions.

Founder/CEO TrustEgg - The deposits are held at an established Trust Co. (Summit Trust Co. of Nevada)and if something were to happen to Summit or TrustEgg, the accounts would be transferred to another Trust Co. under the supervision of the State Department of Financial Institutions.

If your startup is in California, where does Nevada comes from?

You see -- those kind of red flags to me would be a huge no-no. Like those Cayman accounts and other accounting practices.

Something is fishy here.

Founder/CEO - TrustEgg - Most financial institutions are based out of a few select states, Nevada being one. Similar to every company being formed in Delaware.

Do you have any idea what you are talking about?

Your savings account is held by a Delaware corporation. Oh no!

If you write a will with a lawyer, it doesn't get cancelled when the lawyer dies.

The trust isn't going to disappear if the business goes away no more so than any other legal document. These guys appear to just be facilitators for setting up a trust.

A trust needs to last a very long time. What happens if this startup fails/folds?

"“TrustEgg” is a product offered by the SUMMIT TRUST COMPANY, a Nevada trust company."

TrustEgg Founder - If TrustEgg were to fail, the accounts would be transferred to a different Trust Co in coordination with the State Division of Financial institutions.

FYI, you have a typo on one page. If you go here: https://www.trustegg.com/Learn_more_about_TrustEgg_child_tru... and then choose "Earn market rate of return", you say at one point "marketing rate of return". I assume you meant "market rate of return"

The service is surprisingly decent for very simple trusts of their target market, but it costs 89 basis points (0.89%) for the assets under management, which is quite a lot for such simple trusts. Then again, given the modest sizes of the trusts that they will be managing, 0.89% is probably not much.

Over 17 years (example taken from elsewhere in the thread) that works out to 14.1% of the total amount assuming the total amount is paid out when the beneficiary of the trust reaches the age of majority.

Founder/CEO TrustEgg - For most families the only option they have, or are using right now, are savings accounts which over time will lose to inflation. We offer a way for accounts to receive a market rate of return. As for pricing, an adviser based 529 plan is going to add an additional 1% to the management fee, or ~6% load on deposits.

Your comment is very misleading. Families can invest in any of the same investments you do, directly via Fidelity or Vanguard, and save an enormous amount in fees. You may add value by being a nicer UI/wrapper around these existing services, but at least be honest about that and what your customers are paying for.

Founder/CEO - TrustEgg - We eliminate the minimums. To open a Vanguard 'Wellington Fund' account - you would need $3,000. Also when purchasing, or making a trade, you are usually going to pay a fee.

> Also when purchasing, or making a trade, you are usually going to pay a fee.

Obviously, when buying a Vanguard fund at a Vanguard account there is no fee

It seems they are charging ~.5% on top of whatever Vanguard charges, whose own expenses are typically around .3%.

For the general case it probably makes more sense to just invest in Vanguard directly. The downside is that people would have to do their own research in regards to asset allocation. But imo that endeavor would be worth it seeing how these accounts will be around for potentially decades.

Vanguard will tell you exactly how to allocate: in the retirement 20xx fund for the year you want cash.

What a joke --

"Watch it grow",

"The money in the account will be invested in a mutual fund and will grow at the market rate of return!"

Then somewhere deep down in the FAQ they say they use Vanguard Wellington.

Is anyone that naive to fall for this?

What's wrong with regular UTMA, UGMA or 529 accounts?

(I have two kids, aged 5 and 1 -- both have 529s with Utah UESP, one of the best 529 plans out there)

You may very well lose money.

> 529

I looked into that, but since my kids have dual citizenship (US/Italy), and since I could easily envision them not going to school in the US, or deciding that university isn't for them, the penalty provisions of that seemed a bit onerous.

You can use a 529 to study abroad as long as the foreign educational institution has what is called a federal school code.

https://retirementplans.vanguard.com/VGApp/pe/pubnews/TenThi...

http://www.savingforcollege.com/eligible_institutions/?cbdFo...

There are 354 foreign schools/colleges listed, 7 of them in Rome. I did not check other cities in Italy.

It's not too late! Take whatever help the government gives you!

Most of the ones I found in Rome were along the lines of

"PONTIFICAL NORTH AMERICAN COLLEGE"

Which sounds like some sort of religious institution. Also, none of the major Italian universities in Rome are listed, to say nothing of the University of Padova here in Padova/Padua, which is one of the oldest universities in the world, and where Galileo spent "the happiest years of his life". Granted, these days it's not ranked that well worldwide, but hey, who knows where they'll end up, and getting 10% grabbed sounds like a bad deal.

TrustEgg Founder/CEO - You can set-up your own UTMA, but you would need to be the custodian. If you have a third party custodian (what we offer) then the price increases. We also have no minimums, which keeps many people from starting an account. TrustEgg also brings in friends and family to make contributions. TrustEgg makes everything easy. As for price, if you have an adivser based 529 plan, you will pay an extra 1% on top of the mangement fees, or a load of around 6%.

> You can set-up your own UTMA, but you would need to be the custodian.

Quoting wikipedia[1] on the difference this makes.

> The donor can serve as a custodian, rather than transferring the property to someone else to hold for the minor. However, the value of custodianship property is included in a donor’s gross estate if the donor dies while serving as the custodian.

[1] https://en.wikipedia.org/wiki/Uniform_Transfers_to_Minors_Ac...

Apart from a nicer UI, and the somewhat orthogonal feature of keeping a journal to share with your kid later on, how much benefit does this really offer over just setting up a trust directly with Vanguard rather than indirectly through TrustEgg?

With Vanguard, you save about 0.7% of annual fees -- which is $3390.26 for every $10,000 invested over 18 years, growing at 6%.

Founder/CEO TrustEgg - We allow families an easy way to bring in friends and family to make contributions. Social savings for the child's future.

Vanguard supports contributions to accounts you don't own, so that still falls under "nicer UI".

Not that you can't make a service around wrapping a nicer UI on top of something that many people legitimately find complicated. I just wondered if TrustEgg offers any services that Vanguard doesn't offer at all, or if they just provide a user-friendly face on a complicated but working process.

Just an FYI: If you transfer more than $13k in a year to the account it will trigger gift taxes.

$14,000 for 2013.

Also note that lifetime tax-free limit is $5.12 million. So if you 'accidentally' gift more than $14k, you just fill form 709 and pay no taxes till $5.12M

Yeah, my parents were all scared about gift taxes when loaning us money short-term for our downpayment... then we read the fine print - and the loan was well south of the lifetime tax-free limit.

The lifetime limit is equal to 400 years of gifting ?!

The social gifting bit is nice, to save the hassle of accumulating attacks of $50 securities that cost more to track and redeem than they are worth.

whoot whoot, more trust fund babies...

Helping your children pay for education doesn't make them a "trust fund baby", it just makes you a good parent.

money isn't everything. you don't need a trust fund to pay for an education. a 'good' parent spends time with their kids. that's all a kid really wants. i know plenty of friends making 6 digits and double income parents, so much money but no time for timmy. its so sad. conversely my hippy friend makes mostly nothing and spends every waking day with his kid.

I think your point is misdirected. It is virtuous to spend time with kids and save money as well. Your hippy friend may enjoy financial aid (not to mention social welfare) that the taxpaying middle class do not qualify for.

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