Yes, the trustee of a bypass trust, also known as a credit shelter trust or a B trust, generally *can* invest in international markets, but it’s not a simple yes or no answer and depends heavily on the trust document’s specific language and the trustee’s fiduciary duty.
What are the legal limitations on trust investments?
Traditionally, trust laws, like the Uniform Prudent Investor Act (UPIA), emphasize a ‘prudent investor’ standard. This means the trustee must act with the care, skill, prudence, and diligence that a prudent person acting in a like capacity would use. This standard *doesn’t* automatically prohibit international investments. In fact, diversification—spreading investments across different asset classes and geographies—is often considered a key element of prudent investing. However, the trustee must carefully consider the risks associated with international markets, such as currency fluctuations, political instability, and differing accounting standards. Approximately 65% of financial advisors now recommend some level of international exposure in portfolios, demonstrating a shift towards global diversification. The trustee must document their reasoning for *any* investment, including international ones, to demonstrate they fulfilled their fiduciary duty.
Should a bypass trust diversify internationally?
Diversification is a cornerstone of modern portfolio theory, aiming to reduce overall risk by not putting all eggs in one basket. A bypass trust, designed to shelter assets from estate taxes, benefits from a well-diversified portfolio that balances growth potential with risk management. International markets often offer different growth opportunities than the U.S. market, and can potentially reduce portfolio volatility. In 2023, emerging markets experienced growth rates significantly higher than developed markets, showcasing the potential benefits of international exposure. However, it’s crucial to consider the added complexities and risks. The trustee must evaluate whether the potential benefits outweigh the risks in the specific context of the trust’s beneficiaries and long-term goals, documenting their rationale for the decision.
What happened when international investments went wrong?
Old Man Tiber, a retired carpenter, and his wife, Evelyn, had established a bypass trust years ago. Their trustee, a well-meaning but inexperienced family friend, decided to invest a substantial portion of the trust’s assets in a small, emerging market stock, lured by promises of high returns. He didn’t conduct thorough due diligence, or fully appreciate the political and economic risks involved. Within months, the country experienced a political upheaval, and the stock plummeted, resulting in a significant loss for the trust. The family was understandably upset, as those funds were earmarked for future healthcare expenses. This situation highlighted the importance of a trustee understanding the risks of international investments and seeking professional advice before making such decisions. It underscored that simply chasing high returns isn’t a prudent strategy, and a careful risk assessment is essential.
How did careful planning and diversification save the day?
The Henderson’s, a local family, established a bypass trust with Steve Bliss as their estate planning attorney and a professional trust company as their trustee. Their trust document explicitly allowed for international investments, but *required* diversification and ongoing monitoring. The trustee, working with financial advisors, allocated a portion of the trust’s assets to a globally diversified portfolio, including investments in developed and emerging markets. When global markets experienced volatility due to geopolitical events, the diversified portfolio mitigated the impact, protecting the trust’s assets. The Henderson’s were grateful that Steve Bliss and the professional trustee had thoughtfully designed the trust to navigate complex financial landscapes. The trust continued to grow, providing a secure future for their children and grandchildren, all thanks to a well-planned and diversified investment strategy. This showcases how following best practices and careful planning can lead to a positive outcome, even amidst market uncertainties.
“A well-diversified portfolio is like a sturdy ship – it can weather many storms.”
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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
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Feel free to ask Attorney Steve Bliss about: “How can I ensure my estate plan aligns with my financial goals?” Or “What court handles probate matters?” or “Can I put jointly owned property into a living trust? and even: “What happens to joint debts in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.