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Hire Investment Experts

Delegate To An Investment Agent

Hire a bank or professional money manager to invest the trust’s assets; the trust pays for the fees. One of the most intelligent, prudent things that an individual trustee can do is to hire an investment expert – one who can manage and invest the trust’s assets.

The act of hiring an investment expert is so important, not only for the trust and its beneficiaries, but also for the trustee, that a chapter dedicated solely to this issue is warranted.

Trustees Cannot Delegate Discretion, But May Delegate Investment Functions

A trustee is generally not permitted to delegate his or her discretion to another. In other words, you can’t ask someone else to make a judgment call, or impose their discretion in place of your own. After all, you are the trustee. You were selected. You agreed to serve. Your judgment and good sense follow. You make the tough calls.

A trustee, however, may employ professionals, like attorneys and accountants, and also experts to advise on investing.

The trustee may delegate all investment functions to an investment agent. When permitted and proper, delegation can minimize or eliminate potential liability for investment losses.

Delegation suggests the transfer of all investment functions to an investment agent, who will make the calls on what to purchase, retain or sell. The idea behind this is that by permitting delegation of all investment functions, the trust gets professional money management, and the trustee gets limited liability if the investment agent was properly selected and monitored.

Selecting An Investment Agent

The trustee is required to carefully select the investment agent by using reasonable skill and care. If you need help selecting an investment agent, ask your trust counsel.

Your investment agent should not be a family member or any one with whom you have personal or financial ties – no matter how good an investor that person is believed to be. It’s easier to tell you what not to do.

Don’t:

  • Hire someone just because you trust them .
  • Hire anyone without experience of investing trust assets, or investing assets on a discretionary basis .
  • Hire your neighbor .
  • Hire someone with little experience .
  • Hire someone who watches CNBC a lot in their spare time and who reads the Wall Street Journal.

And for God’s sake, don’t hire your child, your in-law, step child or lover.

Hire one who invests others’ funds as a full time job. Consider hiring a bank or trust company to serve as investment agent.

Any delegation should be in writing, and the investment agent should accept, in writing, the delegation and its scope.

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