Estate & Trust Administration For Dummies, 2nd Edition
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As trustee, you have the ultimate choice of investments, and you can choose based on your philosophy of life. Socially responsible investing has been around for a long time, beginning with the Quakers in the 18th century, but it’s taking on greater importance and variety in the 21st century.

If you want to invest only in companies whose stated goals are making the world a better place, you now have plenty of company and an abundance of options. You can elect to invest in companies that guard the environment, practice ethical business, protect human rights, foster consumer protection, stay far from unhealthy lifestyles and behaviors, and so on.

When it’s your money, you can invest it as you please; when the money belongs to the trust, you must invest with a profit motive in mind. Even though no one can ever guarantee that an investment will provide x amount of income or increase in price by y, investing always carries the presumption of making money.

Remember, so long as a socially responsible corporation or mutual fund can show that it’s acting to produce a profit, you’re okay in putting trust money there. But if the company is merely concerned with doing good in the world and not with producing profits for its shareholders, you’re required to keep your trustee hands in your trustee pockets no matter how much you want to applaud its good work.

Not only can you invest in individual companies, but also there is an ever-lengthening list of socially responsible mutual funds offered by a variety of mutual fund companies.

Socially conscious estate investments

Investing used to be so straightforward. In order to create a balanced portfolio, you purchased blue-chip stocks (stocks in well-regarded, stable companies with good records of earnings and price stability) or all the stocks listed on the Standard and Poor’s index. Now, of course, it’s not enough to buy what everyone else has been buying for generations.

Today, if you want to be socially responsible and conscious, you also need to look closely at each corporation’s hiring practices, treatment of their employees, environmental impact (and whether that’s improving), and kinds of goods produced.

For example, is the company manufacturing more garbage for landfills, or are they using an environmentally sustainable model in production? In fact, in order to be a truly socially conscious investor, you need to study far more than the balance sheet — you need to check out the corporate philosophy and its implementation.

Socially conscious investing is a difficult matter. No corporation is going to come up trumps in every category you may be concerned with, and if you’re interested only in buying ones that do, your potential list of corporations is going to be very short. Instead, you may want to create your own set of criteria, focusing on those areas of social responsibility you are and aren’t willing to compromise on.

So you may find a company that promotes women at the same rate as men but hasn’t reached energy sustainability just yet. Or you may find the perfect corporation, and then discover that it invests its excess cash in the stock of a corporation you despise. Remember, no corporation is perfectly conscious — perfect consciousness is a Zen concept that just doesn’t translate well to the corporate boardroom.

Politically aware estate investments

In addition to being socially conscious, many investors are also trying to push one political agenda over another in their choices of investments. There’s some proof that this strategy works — who can deny that South Africa is a very different place today because investors deserted South African companies to force change in that country? However, Cuba is very much the same place today, so the strategy isn’t foolproof.

No laws prohibit buying or boycotting companies based on the countries where they’re located or companies whose stated business purpose supports one political point of view. So long as you, as trustee, are sufficiently convinced that a company has a solid business plan and all the tools in place to turn a profit and add to the trust’s bottom line, that company represents a valid investment for the trust.

The fact that you have the ability to further your own political agenda at the same time is kind of a nice side benefit.

About This Article

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About the book authors:

Margaret Atkins Munro, EA, has more than 30 years of experience in trusts, estates, family tax, and small businesses. She lectures for the IRS annually at its volunteer tax preparer programs. Kathryn A. Murphy is an attorney with more than 20 years of experience administering estates and trusts and preparing estate and gift tax returns.

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