Perfect Investment Strategy for Florida Trustees?: how to lawsuit-proof your Florida trust assets?

Are you the trustee of a Florida trust?  If so, you should know that you are required to invest those Florida trust assets for the benefit of each beneficiary as a prudent investor.   After all, Florida has a prudent investor rule which tells Florida trustees how they should invest (sort of).   So, why is this topic important?  From Stuart, Florida to Ft. Lauderdale, Florida, probate lawyers in Palm Beach, Martin, Dade and Broward are writing wills and trusts.  A big part of that estate and trust practice in Florida is the Florida revocable trust , also called the Florida living trust.   Trust lawyers from Jupiter to Boynton Beach and Coral Springs to Miami Beach are recommending a Florida revocable trust as the “main” way to leave your wealth, and your Florida propety, at your death.  So, when you die, your Florida revocable trust becomes irrevocable…..and someone is going to be trustee.  How can an individual trustee protect himself or herself from beneficiary lawsuits?   First you can resign and let a professional trustee serve.  Absent that, you can delegate, in writing, all investment functions to an “investment agent” under Florida trust law.  Florida trustees who select an investment agent, sometimes referred to as an investment manager or portfolio manager, properly, can minimize potential liability from a  Florida trust beneficiary lawsuit.  Lastly, hire trust counsel:  an experienced and knowledgeable trust lawyer who has years of practice in Florida trust administration, the Florida prudent investor rule,  Florida trust investments and trust litigation and disputes.  If you are not going to resign as Florida trustee, not going to hire a Florida investment manager or investment agent, and not going to hire a Florida trust lawyer, what can you, a Florida trustee of a Florida trust, do to protect yourself from a beneficiary who might sue you?  Well, since most people don’t have the time or experience to be good stock pickers, don’t buy and sell individual securities.  Invest the trust assets in good funds:  hire the experts?  Sort of.  You mean buy mutual funds?  Maybe. How about going “active passive”?   Diversifying the trust portfolio across a number of index funds may be a great idea.  Diversification is an important part of the Florida prudent investor rule and a requirement for a Florida trustee when investing, and administering, trust assets and trust property.   But since many mutual fund managers don’t beat the performance of most indexes, what should a Florida trustee do, or how should a trustee invest the Florida trust?  Is there a way to bullet proof the trust, or trustee, from liability?  No.  But here’s a concept for you to consider:   purchase a diversified basket of index funds:  small cap index, mid cap index, large cap index, international fund, emerging markets fund, fixed income fund,  and perhaps a REIT index.   By actively investing in index funds, you are getting exposure to the markets without individual stock selection.  You should be getting low costs, saving money for your trust beneficiary.  If you don’t committ all the Florida trust funds at one wack, you can buy on the dips and purchase trust investments carefully and selectively:  opportunistically.  But don’t take my word for it.  After all, no one investment strategy works for every Florida trust.  Re think going it alone:  hire a good Florida trust lawyer.  There are many very competent, honest, and skilled Florida trust lawyers from Parkland to Wellington, from Boca Raton to Jupiter Island.  Be prudent.