It's clear to most people that our economy is suffering. Banks have failed, been purchased or been bailed out by the government. The number of foreclosures is increasing compared to recent years. And it's difficult to know which kinds of investments are right for you, and which aren't. Trusts are also affected by the current economic climate.

Many Americans create trusts as part of a personal family estate. In some states, revocable or "living" trusts are created to avoid probate or estate administration. Attorneys may recommend using irrevocable trusts to avoid taxes or to hold specific kinds of assets, which can include, but are not limited to, a business, investment assets, cash, and life insurance policies.

These trusts are just as vulnerable to the economy's woes as are individual checking or savings accounts. A trust check-up to spot issues related to your trust may be in order.

Who Is Your Trust's Trustee?

Banks and other financial institutions are types of corporate trustees. Review the trust to determine who the current trustee is. Since some banks have changed hands, the corporate trustee of your trust may also have changed. A change in corporate trustee is not necessarily a bad thing, especially if the new one is more financially stable.

On the other hand, your trustee may be unchanged. Even if this is the case, your trustee may have been bailed out by the government in recent months. This review will help you to determine whether your trustee is financially stable, or if it's struggling to survive. This will help you to decide whether the current trustee is acceptable to you, or whether to make a change now.

Some trusts have specific rules regarding a change of trustee. An attorney can determine when, and if, a change is made, and how to do it.

What Is Your Trust's Investment Mix?

If you don't know the answer to this question, you should find out immediately. Financial advisors differ in opinion as to which investments are appropriate for the current economic climate. However, some investments are clearly more appropriate than others are depending on your age and willingness for risk. Ask your financial advisor to review the investments to ensure they are properly invested, or if changes should be made.

In addition, if the assets of the trust have decreased significantly, review the trust's earning power to determine whether the trust is still reasonably able to support a corporate trustee. Corporate trustees provide a valuable service, but this service has a cost. If your trust is no longer earning enough to support the services of a corporate trustee, consider changing the trustee or the investments, or negotiate a lower fee, if possible.

Trusts are like individuals. With a little attention and assistance, it's possible to weather difficult economic times with success.

Questions for Your Attorney

  • If a corporate trustee isn't a good fit for my trust anymore, who should I consider in filling that role?
  • Does my trust offer the flexibility and provisions needed to navigate today's volatile markets and economic conditions? Can and should I make any changes to my trust?
  • How often should I review my trust?

Tagged as: Trusts and Estates, Estate Planning, trust review, estate lawyer