A cool million to invest: so-so rates or a little risk?

Q: I want to invest $1 million over a 12-month period. I'm seeking an interest rate above 5 percent no matter where the bank is located. The application and paperwork must be done by mail or e-mail.
B.W.R., Satellite Beach, Fla.

A: "You need to lower your expectations," says certified financial analyst Phillip Cook of Torrance, Calif. "I don't know of a bank in the country that would pay 5 percent on a one-year deposit of $10 million, let alone $1 million."

A search at www.bankrate.com turned up offers of 3.3 percent, well below the minimum that you seek for 12-month certificates of deposit. That's for "jumbo" certificates, or those of $100,000 or more.

To get a 5 percent return today, you're going to have to shoulder some risk, Mr. Phillips says. He suggests looking at preferred stocks, REITs (real estate investment trusts), or corporate bonds. As you probably know FDIC insurance only goes up to $100,000 per institution. To get full coverage on your $1 million, you'll need to go to 10 different banks.

Q: When my wife died, I set up a family trust for my three children. This is a revocable trust and my daughter is the alternate trustee. After I pass on, can my daughter continue with the trust as she wishes? Does Pennsylvania have any conflicting laws? Are there any tax laws we ought to be aware of?
J.C., Exton, Pa.

A: The trust document spells out what should happen to the trust's assets upon your passing, says Robert O. Smith, a certified financial planner in Exton, Pa. It should state when and to whom the money gets distributed while you're alive - and afterward. If the trust continues after your passing, your daughter/trustee cannot just do as she wishes, Mr. Smith says. She is responsible for managing the trust according to its terms.

If you're concerned that this trust money will be lost because of a child's divorce or bankruptcy - or you would like the money to go to grandchildren - Mr. Smith suggests that you consider distributing the money outright to your three children upon your passing. But you might want a trust if any of your children or grandchildren have special needs and are receiving any government assistance.

Entire libraries are brimming with laws and rules pertaining to trusts and their tax treatment. You ought to be aware of these - or at least your attorney should. Smith says you should check with her in order to make the process go smoothly.

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