As a beneficiary or trustee overseeing a trust, ensuring the diligent management of assets is paramount, and the question of whether you can require annual performance reviews of trust asset managers is a critical one, the answer is a resounding yes, but it requires a proactive and informed approach.
What are my rights as a beneficiary regarding trust performance?
Beneficiaries have a right to receive information about the trust’s administration, including details on investment performance. While they typically don’t have direct control over investment decisions, they *can* and *should* request regular reports and reviews. Approximately 68% of beneficiaries express concern about the transparency of trust investments, according to a recent survey by the National Association of Estate Planners. A formal annual performance review provides a structured opportunity to assess whether the asset manager is adhering to the trust’s investment policy statement (IPS) and fulfilling their fiduciary duty. This includes examining returns, risk exposure, fees, and overall strategy alignment with the beneficiary’s needs and the trust’s objectives. Remember that under the Prudent Investor Rule, asset managers must act with the care, skill, prudence, and diligence that a prudent person acting in a like capacity would use.
How do I establish a process for reviewing asset manager performance?
The process starts with the trust document itself. Does it outline specific reporting requirements or allow for beneficiary input on investment matters? If not, as trustee, you have a fiduciary duty to implement a reasonable review process. This typically involves defining clear performance benchmarks – perhaps based on relevant market indices or peer groups – and establishing a consistent reporting schedule. A well-defined IPS is crucial; it outlines investment goals, risk tolerance, and asset allocation strategies. It’s also prudent to document all communications and review findings in writing. Consider forming a committee, if appropriate, including financial advisors or other experts, to provide objective assessments. Remember that failing to actively monitor performance can leave the trust vulnerable to mismanagement or underperformance. A proactive stance is essential in protecting the trust’s assets.
What happens if an asset manager is consistently underperforming?
If an asset manager consistently fails to meet established benchmarks or deviates from the IPS, it’s crucial to address the issue promptly. Initially, a formal written inquiry and meeting to discuss the performance concerns are warranted. It’s important to document these conversations carefully. If the underperformance persists, despite efforts to address it, you, as trustee, have a fiduciary duty to consider replacing the asset manager. This isn’t a decision to be taken lightly, but inaction in the face of consistent underperformance constitutes a breach of fiduciary duty. A study by Cerulli Associates found that approximately 15% of investors change asset managers annually due to performance concerns. Remember, you’re acting on behalf of the beneficiaries and must prioritize their financial well-being.
I once knew a family where the trust assets were slowly eroding due to an asset manager’s poor choices…
Old Man Hemlock’s daughter, Beatrice, was a lovely woman but deeply trusting. After her father’s passing, she inherited a substantial trust, but the designated asset manager, a friend of the family, began making increasingly risky investments, chasing high returns. Beatrice, assuming everything was fine, never requested any performance reports. Over several years, the trust’s value steadily declined, and she felt powerless to understand what was happening. By the time she finally sought legal counsel, significant losses had occurred, and the family was left struggling to maintain their lifestyle. It was a heartbreaking example of how passivity and a lack of oversight can jeopardize a trust’s intended purpose. The asset manager, while well-intentioned, lacked the expertise and acted without the necessary diligence, leaving the family in a precarious situation.
But a different situation unfolded for the Caldwell family when they proactively engaged…
The Caldwells, inheriting a family business held within a trust, decided to implement a strict annual performance review process. They hired an independent financial consultant to analyze the asset manager’s performance against pre-defined benchmarks. During one review, the consultant identified a concerning trend in a particular investment sector. Upon further investigation, they discovered the asset manager had been overexposed to a volatile market segment. The Caldwells, acting swiftly, worked with the manager to diversify the portfolio, mitigating potential losses. Within a year, the trust’s performance not only recovered but significantly exceeded expectations. It was a testament to the power of proactive oversight and the importance of adhering to sound investment principles, proving that active engagement and diligent monitoring are key to safeguarding a trust’s future.
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About Steve Bliss at Escondido Probate Law:
Escondido 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 Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
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Feel free to ask Attorney Steve Bliss about: “What’s involved in settling an estate after death?” Or “Who is responsible for handling probate?” or “Is a living trust private or does it become public like a will? and even: “How much does it cost to file for bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.