The fiduciary responsibility to create an effective estate investment plan is something that some trustees and administrators find to be a challenge. Trust laws allow estate planning clients a fair amount of control and flexibility in asset diversification. If the goal is to generate income while minimizing taxes, and protecting assets for the purposes of family legacy, working with a licensed estate planning specialist who offers expert advice about trust investment, will assist a client in accomplishing the financial objectives of an estate.
Asset Diversification Strategies
Most high net worth estate planning clients require a diversified portfolio of equities, fixed-income securities, hedge funds, private equity, real estate, and natural resource funds. Since enactment of the Uniform Prudent Investor Act (UPIA) in 1994, all trustees in the United States must consider specific guidelines when formulating an investment strategy. In accordance with the legislation, a trust investment planner must consider the duration of the trust; the size of the portfolio; liquidity and distribution; tax consequences; expected total returns; individual investments; and the overall economic environment. Rules of UPIA fiduciary duty stipulate that trust assets are to be diversified, unless the purpose of the trust is solely for the targeted transfer of a family interest in a business, or to avoid capital gains. Trustee fiduciary liability is the premise of the legislation; also limiting client exposure to high-risk diversification strategies.