Page 54 - Successor Trustee Handbook

A good rule of thumb to live by is that any excess cash not immediately needed
for purposes of administration, such as for the immediate payment of expenses
or distributions to or on behalf of beneficiaries, should be placed in interest-
bearing or income-producing investments with sufficient liquidity so that you
can access again a portion of this cash when reasonably anticipated for future
administration needs. Another good rule of thumb is that when you are in doubt
about Trust investments, choose on the side of conservatism. Beneficiaries are
far less likely to object to not getting enough income or growth of principal,
than to object because of your losing principal!

Several special issues may arise when investing, particularly with respect to (1)
a closely held business owned by Trust (including rental real estate), (2)
retirement accounts, IRAs, and annuities, (3) life insurance, and (4) sales of Trust
assets and investments.

With respect to a closely held business owned by to the Trust (as opposed to
shares in a business publicly traded on the stock market), the first key decision
that must be made is whether or not to continue, close, sell or liquidate the
business. Sometimes, outside experts can be brought in to assist in the
operation of the business, such as a property manager for rental real estate. At
other times, the business may suffer a serious loss in value if it is not closed,
liquidated, or sold promptly. Before making this key decision, you should see the
business’ or Trustor’s accountant or other key personnel involved and possibly
even the business’ attorney. Sometimes, you, as Trustee, may be taking upon
yourself far too much risk to continue to own and operate a business whether or
not you are skilled to do so. The issue of whether to continue or wrap up,
liquidate or sell the business may be impacted by agreements not part of the
Trust, such as operating agreements or buy-sell agreements between business
partners or between the Trustor-business owner and key personnel. You should
look for such agreements and have them reviewed by an attorney before
making any decisions with respect to the business.

Retirement plans, IRAs and annuities are usually not even assets owned by
the Trust. Nevertheless, you may be required to properly monitor and invest
these assets under the Trustor’s Durable Power of Attorney, if he or she is alive
but disabled, or as executor of his or her estate (his or her non-Trust assets)
under the Trustor’s Will if he or she is deceased. These types of assets have
peculiar limitations or requirements on the kind of investments that can
be made inside of them and the amounts and timing of withdrawals, as
well as unique income tax rules that apply to withdrawals. You should seek
the assistance of a financial advisor who has expertise in dealing with these
types of investment assets. Whatever decisions are made with the financial
advisor should be run by the attorney before

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