Exercise Good Fiduciary Judgment for an Estate or Trust
As the executor or trustee, it is crucial that you use good fiduciary judgment. Seek sound professional advice, invest the estate or trust assets wisely, and pay beneficiaries and all bills on time. Be sure to diversify your investments, and follow recommended practices. For smaller trusts, consider investing in well-chosen mutual funds, in addition to bonds.
The days are long gone when executors and trustees were only rarely called on the carpet for exercising poor fiduciary judgment. As more people have started investing personally, whether through their retirement accounts or through Internet brokerages, they’ve become much more sophisticated and knowledgeable about the entire investment process.
People are therefore much more likely to comment unfavorably on your handling of the trust or estate’s assets.
As the executor and trustee, you must act prudently and deliberately, seeking advice when you need it, investing the assets wisely, and paying the bills and the beneficiaries when they’re due to be paid.
Remember that the decedent or the donor chose you to look after his or her property because of your good judgment. Don’t hesitate to employ a professional to help you in choosing investments for the estate or trust.
If you do turn to professional help, make sure you check references and determine how much experience that person has in the investment of trust and estate assets. His or her investments should be fairly conservatively, but broadly, invested across all industries.
If a trust is ongoing, for example, a general rule is that the trust should own pieces of between 140 and 175 different companies, in addition to whatever bonds or other savings accounts it owns. If yours is a smaller trust, buying stock in all these companies might result in purchases of only a few shares. Therefore, you can easily meet this standard by investing in a few well-chosen mutual funds.