Estate Planning as a Career

A trust is a frequently used estate-planning or asset protection instrument. Whether you plan to create a trust or are a trust beneficiary, you should be familiar with the law that governs how the trustee invests the money in the trust.

A person who creates a trust may state how s/he wants the trust invested right in the trust itself. Most trusts, however, do not contain specific investment direction because the kinds of and returns from investments change over time. If the trust is silent in that regard, there is a statute that governs the trustee known as The Prudent Investor Law.

Every trust is unique. A grandmother may create a trust to benefit her grandchildren when they reach the age of majority. A couple of retirement age may put all of their assets in a trust to provide income to them for the rest of their lives. The Prudent Investor Law requires the trustee to invest and manage trust assets as a prudent investor would by considering the purposes of the trust, the terms of the trust, the distribution requirements under the trust and other factors relevant to each particular trust. Thus, the trustee who manages the investments in the trust of the retired couple who have no income other than that produced by the trust, is required to invest very differently from the trustee who invests for the minor children in the grandmother’s trust who will get no distributions for many years.

Among other things, the trustee is required to diversify the assets in the trust, make conscious decisions about the asset allocation in light of the particular circumstances of each trust and to avoid unjustified fees and transaction costs. The trustee must also monitor the investments and reallocate the trust assets when investments are inconsistent with the investment strategy. Thus, if for example it has been determined that in view of the life ex (more…)