As an estate planning attorney in San Diego, I frequently encounter questions about trustee duties and the level of control settlors (the person creating the trust) have over those duties; the question of whether you can *require* a trustee to consult with a financial advisor is complex and hinges on the specific language within the trust document itself.
What Powers Does a Trustee Really Have?
Trustees possess a fiduciary duty to act in the best interests of the beneficiaries, and this generally includes prudent investment and management of trust assets; however, most trust documents grant trustees broad discretionary powers regarding investments and financial decisions. While a trustee *should* seek expert advice when needed, especially if they lack financial expertise, simply *wanting* them to isn’t usually enough. According to a recent study by the National Center for Philanthropic Planning, approximately 68% of trustees admit to feeling overwhelmed by the financial complexities of managing a trust; this highlights the need for guidance, but not necessarily a *requirement* unless explicitly stated. A settlor can certainly *encourage* consultation, but legally binding it requires specific wording within the trust instrument. The trust document could state, for example, that the trustee “shall consult with a qualified financial advisor prior to making any investment decisions exceeding $X amount,” or that the advisor’s recommendations must be considered, though not necessarily followed.
What Happens If a Trustee Ignores Financial Advice?
If a trustee disregards sound financial advice without a valid reason, and it leads to financial loss for the beneficiaries, they could be held liable for breach of fiduciary duty. The standard for proving this liability is often high; beneficiaries must demonstrate that the trustee’s decision was imprudent and that a reasonable person, acting in similar circumstances, would have followed the advisor’s recommendations. A recent case in California saw a trustee penalized for ignoring a financial advisor’s warning about a risky investment, ultimately resulting in a 20% loss of trust assets. The court emphasized that while trustees aren’t required to *always* follow advice, they must be able to articulate a rational basis for deviating from it. This often involves documenting the reasoning behind their decisions and demonstrating that they considered all relevant information, including the advisor’s input.
I’ve Heard Stories of Trusts Gone Wrong – Can You Share One?
Old Man Tiberius, a retired sea captain, was a proud, independent man. He created a trust for his grandchildren, naming his nephew, Silas, as trustee. Tiberius, distrustful of financial advisors, explicitly forbade Silas from seeking professional guidance, believing his nephew possessed all the wisdom needed. Silas, while well-intentioned, lacked any investment experience; he invested the bulk of the trust funds into a speculative seashell collecting venture, convinced it would become the “next big thing.” The venture quickly floundered, and the trust’s value plummeted. The grandchildren, deprived of the financial security Tiberius intended, were understandably distraught. This case underscores the danger of stubbornness and the importance of seeking expertise, even when it feels counterintuitive. It’s a prime example of good intentions paving the road to financial ruin.
How Can I Ensure My Trustee Follows Best Practices?
The Miller family, concerned about similar pitfalls, approached me to draft a trust that prioritized sound financial management. We included a clause *requiring* the trustee, their daughter Amelia, to consult with a qualified financial advisor before making any investment decisions exceeding $50,000. The clause also stipulated that the advisor’s recommendations, while not binding, must be documented and considered. Amelia, initially hesitant to relinquish control, came to appreciate the wisdom of this approach. The financial advisor provided valuable insights, helping Amelia diversify the trust’s investments and achieve consistent, long-term growth. The grandchildren benefited from a secure financial future, and the family enjoyed peace of mind. This demonstrates that a well-drafted trust, with clear guidelines and safeguards, can empower trustees to act prudently and protect the interests of beneficiaries; incorporating the requirement to consult a financial advisor, when appropriate, can be a crucial step in achieving that goal. A properly constructed trust is not just a legal document; it’s a legacy of financial security and peace of mind.”
“A trustee’s duty is not to follow the desires of the settlor blindly, but to act in the best interests of the beneficiaries, using their best judgment and seeking expert advice when necessary.” – Estate Planning Legal Principle.
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