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“Be Involved: Trust Creators and Beneficiaries” ~ by Betsy Sweetser, Esq.

An Article By: Betsy Sweetser, Esq.

Whether you create a trust or are the beneficiary of one, it is helpful to be aware of and involved in issues regarding investment of the money in the trust.

In many cases, a NJ statute – the Prudent Investor Act [the “Act”] – will govern investing. Every trust is unique in its purpose – e.g. a grandmother wants to benefit her young grandchildren when they reach the age of majority or a wealthy person wants to protect assets from reach in case of divorce. The Act says invest and manage trust assets as a prudent investor would in light of the purposes for which the trust was created. The trustee is required to follow an investment strategy that will enable distributions to the beneficiaries as intended by the trust creator.

Surprisingly, it is not unusual for a trustee, including a bank, to act inconsistent with the dictates of the Act. Trust creators, select your trustee wisely. Don’t assume that a financial institution is your best choice or that one bank is as good as another. Ask questions to find out what policies and procedures are in place re: investing at an institutional trustee to insure that money will be available to the beneficiaries when and in an amount you expect.

Participate in the selection of the person at a bank who will invest the assets in your trust – you want a person with education and experience who understands your wishes, and with whom your beneficiaries will feel comfortable.

Beneficiaries — meet with your trustee periodically to satisfy yourself that her/his investment strategy is consistent with the purpose for which the trust was created. Also, make your trustee aware of any significant life changes so that if necessary, investment strategy can be altered. Do not assume that the trustee is automatically doing what s/he is supposed to do – in reality that does not always happen.

Trust creators and beneficiaries, you will benefit from being informed and involved.