GREAT ADVICE FOR FAMILY TRUSTEES FROM THE WALL STREET JOURNAL

In yesterday’s Wall Street Journal, www.wsj.com, reporter Farhad Manjoo provided some of the best advice that can be given to the individual who serves as trustee. (See “HIGH DEFINITION” page B 1.) Although Farhad was writing about Twitter and speaking to investors generally, he could have been addressing the individual trustee.

As many of you know, I write often about the individual–the family member — who serves as trustee of a family trust. I advise that a pro should do the job: the individual often does not have the time nor experience to manage money for others, let alone administer a trust. I write that in today’s legal society, there is plenty of information to be shared about trusts by the trustees to the beneficiaries and many opportunities for beneficiaries of family trusts to be involved in the administration of the trust. It’s not like years ago when some trustees shut the door on the beneficiaries and shared little or no information about the trust. Today’s trust laws require disclosure with serious penalties for the control freak trustee who fails in its duties. But the investing should be left to a pro.

My repeated advice for the individual family member who is nominated to serve as trustee of a family trust: resign and have a professional corporate trustee serve. In the alternative, that is, if you don’t want to resign as trustee: hire an investment agent, a professional to whom you can delegate investment authority.

So what did Farhad Manjoo, farhad.manjoo@wsj.com, write that was so sage? Farhad was discussing whether the much talked about, and now much appreciated, Twitter IPO was worth investing in. His advice: pass. However, here’s what he wrote about investing in general and IPOs: “Don’t invest in individual stocks. Especially don’t invest in tech IPOs. This isn’t tech advice, just widely accepted financial wisdom from normal, non-professional, non-gambling investors. Buy index funds and forget about picking…….If you’re no expert, don’t pit yourself agains the experts.”

Well done.

Previously, on my law blog, I’ve echoed that sentiment: individual stocks are not for individual trustees. Buy index funds and the best mutual funds from the best managers. Picking individual stocks is tough work and not worth the time nor the risk to a family trust if you don’t have the time or experience to do so. So, if you don’t like this advice from a trust lawyer, at least listen to Farhad.