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Uncategorized Dec 28, 2013

It’s the end of the year, 2013, in South Florida and Florida trustees, personal representatives of Florida estates, and other Florida fiduciaries who manage assets for another are looking forward to the new year.

Now is a good time to consider whether you, as a Florida trustee, have done everything you’re supposed to do under the Florida trust code for the benefit of your Florida trust beneficiaries. Or, if you are Florida trust beneficiary reading this, consider whether your Florida trustee has provided you with all relevant information. You no doubt will be receiving a 2013 Florida trust accounting sometime in the first quarter of 2014.

2013 was a banner year for US equities. Stocks of all sizes “roared”, in many cases to new heights. The bull was charging, and charging hard. So, what do you do for 2014 if you’re a Florida trustee? How you look out for your trust beneficiaries and comply with Florida’s prudent investor rule?

Here are five thoughts which Florida trustees may wish to consider for investing trust assets and administering Florida trusts for 2014.

  1. Emerging markets. True, emerging markets were flat  over the last three years, while US equities provided Florida trusts with spectacular returns. But, is now the time to consider looking overseas to invest your trust assets, particularly if you are a contrarian?  If you are a “growth” or “momentum” investor, you are probably sticking right here in the good ol’ US of A. But, each year Florida trustees should be rebalancing your trust portfolio, or least examining it. Are your Florida trust investments now overexposed to US equities? Do you need to pare down a bit? International equities should be at least be a part of a well-diversified, Florida trust investment portfolio, and emerging markets may be one area to consider now, particularly while everyone seems to be looking at social network stocks and the US markets in general.
  2. Inflation. What steps are you, a Florida trustee, taking to hedge against inflation? Are you protecting your Florida trust investments, and if so, how? Will it be by simply investing in stocks? What about ETF’s or funds which invest in commodities? Purchasing real estate? A Florida trustee need not have a crystal ball. Perfection is not required for a Florida trustee. However, you need to at least consider the effect of inflation, or possible inflation, on your Florida trust investments.
  3. REITs and Real Estate. Jason Zweig of the Wall Street Journal, www.WSJ.com, wrote a great article on real estate investment trusts within the last two weeks. REITs have taken a big hit since May, when Federal Reserve Chairman Ben Bernanke discussed “tapering.” Is it time to go back into REITs? REITs are a tough call, admittedly, for Florida trustees. While real estate may be a good hedge against inflation, REITs, which distribute the vast majority of their income to shareholders in the form of dividends or distributions,  are taxed at ordinary income rates.  Be conscious of the after-tax return to your trust beneficiaries. But production of income is only one aspect of a REIT. Capital appreciation is another. But the value of a REIT may decrease if interest rates go up. If you believe that the Federal Reserve will maintain a low interest rate environment, REITs may be a good investment for your Florida trust. The challenge, becomes twofold: first, do you invest in mutual funds, individual REITs, or index funds, and, secondly, clearly, which ones do you pick? Some of those which I follow, but do not necessarily own or invest in, include Simon Property (SPG), Spirit Realty Capital (SRC), Redwood Trust (RWT), Vanguard REIT ETF, Brookfield Property Partners (BPY), CGM Realty Fund. Other interesting real estate plays include CBRE Group (CBG) and Baron Real Estate Fund (www.barronfunds.com) (BREFX).
  4. Europe. European stocks enjoyed a good year, but nowhere near the bull run enjoyed by investors in US equities. Europe still has his problems, with everything from currency issues with the Euro, to continuing to stabilize banks, and high unemployment, particularly for young Europeans. There may be value there, but, perhaps, more importantly, future growth, as contrarians are suggesting that you look across the pond. Consider VEUSX, Vanguard European Stock Index, www.vanguard.com.
  5. Trust disclosure documents under the Florida trust code. Florida trustees  have a duty under the Florida trust code to provide an annual accounting. So get your CPA or accountant, or bookkeeper, working on the 2013 Florida trust accounting you need to send to Florida trust beneficiaries. Until then, send out year end statements of all trust financial accounts to your Florida trust beneficiaries, as a “trust disclosure document”, and include a Florida trust code “limitations notice.” This will accomplish your Florida trust duty of providing relevant information to your Florida trust beneficiaries, and will also permit you to take advantage of a six-month statute of limitation, which the Florida trust code provides to Florida trustees.