Trustees are legally considered fiduciaries and are thus held to strict fiduciary duties. Managing trusts can be complicated and time-consuming enough as it is, with various investments and assets of considerable worth. And on top of that, you have to make sure you're following industry best practices and helping trust beneficiaries achieve best possible outcomes.
It sounds overwhelming, but it doesn't have to be. Our team has created a handy guide to help you understand exactly what is required of you and how to best approach managing the trust.
- Understand the objectives and terms of the trust. Are the trust assets designed to provide for estate liquidity, contribute to a charitable organization, or perhaps care for a disabled child?
- Implement the strategy with the appropriate products. Once the objectives and terms of the trust are understood, what assets should the trust own to meet them?
- Adopt a written management statement. If the trust contains a life insurance policy, this becomes a policy management statement and describes what type of coverage is expected. Should the policy last longer than the life expectancy of the insured? Should it be a paid-up policy or will the trust expect to pay premiums on the policy for a number of years?
- Develop a reasonable investment strategy. How much financial risk is the trust willing to take to reach its goals?
- Regularly review policies and investments and make changes as needed. This process should be documented.
Some trusts own a complex mix of insurance policies, property, stock portfolios, etc., while other trusts may own only one or two assets. Either way, the process outlined above is important in meeting the fiduciary duty of being the trustee. Section 9 of the UPIA allows a trustee to delegate investment and management functions to an objective third-party professional. When this is done, the trustee is not liable for the decisions or actions of that professional, but is still responsible for periodically reviewing any third-party’s performance. Attorneys, trust officers and non-professional trustees can benefit by working with a trust advisor who specializes in a specific asset—for example, life insurance. This trust advisor will bring industry-specific knowledge and experience to the case to help ensure the trust is managed properly and according to the law.