Monthly Update for Administration of Trusts and Asset Management.
It is our hope that our Monthly Update will be helpful for you to better understand the administration of trusts and asset management from the Trustee and Investment Advisor’s viewpoint.
"Have I Got a Deal For You!"
There are thousands of different types of investments that are available, many of which are sound, prudent investments, and many of which are extremely speculative and most likely to result in a loss. And, of course, there are those investments which turn out to be scams.
It is one thing for an individual to make a bad investment decision for himself. It is another thing for a Trustee to make a bad investment decision for the trust and the Beneficiaries.
The Problem
Frequently, family members or close friends are appointed as Successor Trustees for the trust, which many times includes continuing to hold assets in trust for the benefit of the Beneficiaries who are too young or not mature enough to receive the assets outright and free of trust at the time of the Grantor’s death. Unfortunately, many times the Successor Trustees have little to no experience in investing. In a good-faith effort to try to maximize growth or income, or to just “hit a grand slam”, the individual Trustees invest in a highly-speculative investment. Even though the investment was made in good faith, the investment eventually fails and substantial losses are incurred.
Fiduciary Responsibility
Trustees have a fiduciary duty which is owed to the Beneficiaries. If the Trustees breach their fiduciary duty by making improper investments, the Trustee can be held responsible for the losses that are incurred. That result puts the Beneficiaries in the position of making a difficult decision of either accepting the loss or seeking recourse against the Trustee. This decision is particularly troublesome when the Trustee is a family member or a close friend of the family.
When inappropriate investments are made resulting in losses, frequently the Beneficiaries may have no way of recouping their losses because the individual Trustee does not have sufficient assets to pay for those losses.
The Oklahoma Uniform Prudent Investor Act
In making investments, the Trustee must comply with the provisions of the Oklahoma Uniform Prudent Investor Act, (the “Act’), 60 O.S. §161. The Act is a comprehensive set of laws that establishes standards and guidelines for Trustees in making investments on behalf of a trust.
Unless otherwise instructed in the trust agreement itself, a Trustee who invests and manages trust assets owes a duty to the Beneficiaries to comply with the Prudent Investor Act.
Assurance That The Act Will Be Followed
Use of a Corporate Trustee will ensure that the investments made by the Corporate Trustee will be in compliance with the Act, thereby avoiding potential significant losses due to investments that are outside the scope of the Act, or a scam, or otherwise were unreasonable and imprudent in the first instance.
Use of a Corporate Trustee will help avoid possible significant losses by bad or improper investing that might otherwise be incurred by an individual Trustee.
WealthTrust Oklahoma is the Oklahoma Trust representative office of National Advisors Trust Company. We hold a federal charter and are independent. In addition to trust administration services, we offer investment management services through our firm, WTO Advisors.
Alyssa Kaiser, CTFA, has over 30 years experience in the investment, trust and banking industries, and is President of WealthTrust Oklahoma. Alyssa may be contacted at: (405) 241-1600 (office), or by email at Alyssa@WealthTrustOk.com.
WealthTrust Oklahoma: Big enough to administer any Trust, but always with local and personalized service. We are just a phone call away, and are ready to help you with your trust and investment needs.
