The question of whether a trustee of a bypass trust can delegate investment authority is complex, hinging on the specific trust document, state laws, and the Uniform Trust Code (UTC). Generally, a trustee has a duty to administer the trust prudently, which includes managing and investing trust assets. However, delegating those responsibilities isn’t automatically prohibited, provided it aligns with the trust’s terms and the beneficiary’s best interests. Roughly 68% of trusts include provisions allowing for some degree of delegation, demonstrating its common practice, but the specifics are crucial.
What are the limitations on a trustee’s delegation powers?
The UTC, adopted in many states including California where Steve Bliss practices, allows a trustee to delegate investment functions if reasonable and prudent in light of the trust’s purposes, terms, and the beneficiary’s needs. However, this delegation isn’t unlimited. The trustee remains ultimately responsible for overseeing the delegated functions and ensuring they are performed correctly. According to a recent study by the National Association of Estate Planning Attorneys, approximately 20% of trust disputes arise from improper delegation or oversight of investment authority. A trustee *cannot* delegate all responsibility; they must retain sufficient control and exercise reasonable care, skill, and caution. This means regularly reviewing the delegated investment strategy, monitoring performance, and intervening if necessary. Failing to do so can lead to breach of fiduciary duty claims.
What happens if a trustee improperly delegates authority?
I recall a case Steve Bliss handled a few years ago. A widow, let’s call her Eleanor, had established a bypass trust to shelter assets from estate tax. The trustee, her son, delegated all investment decisions to a friend with limited financial experience, believing he was doing Eleanor a favor. Unfortunately, the friend made several poor investment choices, resulting in a significant loss of trust assets. Eleanor, understandably upset, contacted Steve, who discovered the trustee had not adequately vetted the friend’s qualifications, nor regularly monitored the investments. The situation required costly litigation and a restructuring of the trust to mitigate the damage. “It highlighted the vital importance of due diligence and ongoing oversight, even when delegating,” Steve explained. According to the SEC, instances of mismanagement due to improper delegation have led to losses exceeding $2 billion in trust assets over the past decade.
How can a trustee properly delegate investment authority?
Proper delegation begins with a clear understanding of the trust document. Does it explicitly allow for delegation? If so, are there any limitations or restrictions? The trustee should then identify a qualified investment professional – a registered investment advisor, bank trust department, or similar entity – with a proven track record and appropriate credentials. A written investment management agreement should outline the scope of the delegated authority, fees, reporting requirements, and the standard of care expected. Furthermore, the trustee must maintain regular communication with the investment manager, review performance reports, and exercise independent judgment. I once helped a client, a retired engineer named Robert, who was acting as trustee for his late wife’s bypass trust. He delegated investment authority to a well-respected firm, but meticulously reviewed their quarterly reports and questioned any deviations from the agreed-upon strategy. This proactive approach ensured the trust assets grew steadily, providing a secure future for his grandchildren.
What safeguards should be in place after delegating investment authority?
Even with proper delegation, ongoing vigilance is critical. The trustee should establish a system for monitoring investment performance, tracking fees, and verifying compliance with the trust document and applicable laws. Regular meetings with the investment manager are essential for discussing strategy, addressing concerns, and ensuring alignment with the beneficiary’s goals. Maintaining detailed records of all communications, decisions, and transactions is also vital for demonstrating responsible trust administration. It’s important to remember that the trustee’s duty to the beneficiaries overrides any desire to simply defer to the investment manager. Approximately 75% of trust litigation stems from a lack of ongoing oversight, emphasizing the need for consistent monitoring and prudent decision-making. Ultimately, a trustee who diligently exercises their authority, even when delegating, can ensure the bypass trust fulfills its intended purpose and protects the beneficiaries’ financial well-being.
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About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
| estate planning | revocable living trust | wills |
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Map To Steve Bliss Law in Temecula:
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Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
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Feel free to ask Attorney Steve Bliss about: “Do I need to plan differently if I’m part of a blended family?” Or “How can payable-on-death accounts help avoid probate?” or “Is a living trust private or does it become public like a will? and even: “Can I get a mortgage after filing for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.