Page 53 - Successor Trustee Handbook

CHAPTER 13

INVESTING TRUST ASSETS

This area may be somewhat tricky for you even if you are an experienced
investor. It’s not just about making good investments.

First, the kinds of investments you can make, the relative amounts and timing of
those investments, and whether they can favor income for current beneficiaries
or growth for contingent or remainder beneficiaries may be dependent
somewhat on the terms of the Trust document, particularly the paragraphs
describing the Trustee’s investment powers. Second, state laws, such as a
state’s “Principal and Income Act” and/or “Prudent Investor Act” may supersede
the terms of the Trust, or permit the Trust terms to supersede the state laws! All
this may be too difficult for you to sort out alone and is an area where you may
wish to consult with an attorney.

Also keep in mind that, although you have the duty, as Trustee, to make assets
income-producing and to preserve the Trust principal, you do not have a
requirement to maximize income and/or growth of the principal. On the other
hand, merely placing all Trust assets into super-conservative but “safe”
investments, like certificates of deposits and government bonds, may not meet
your requirement to create a “reasonable return.” The easiest and generally
safest rule of thumb is to act as would a “prudent person” handling the
same investment under the same circumstances, always weighing the
risk/reward ratio of each investment decision against the needs of the Trust
(and the beneficiaries) for liquidity, income and/or growth. If you are not an
accomplished investor, it is almost always advisable for you to hire a
professional financial planner/investment advisor to assist you. Look for a
“Registered Investment Advisor”, preferably also a “Certified Financial
Planner®” (or “CFP®”) because they must pass certain examinations to be
licensed and are more highly regulated as to their activities. Of course, the
investment advisor’s credentials, years of experience and references should also
be checked. Remember, even though you may delegate certain investment
responsibilities to this advisor, you are still ultimately liable for selecting an
appropriately skilled advisor, overseeing the advisor, and approving his or her
decisions.

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