Impact of Wall Street woes on Trusts

With all of the financial problems impacting investments in recent days, it is important to appreciate the impact these developments have on trusts.

The following points are made in Arden Dale, Trusts Require Attention During Market Turmoil, Wall St. J., Sept. 23, 2008:

• There are two main concerns:  (1) the corporate trustee may be sold, go bankrupt, or be involved with the government and (2) the value of trust assets may be impacted by market conditions.
• Trust assets held by a corporate trustee are not counted as property of the trustee.  Thus, if the trustee is sold or files for bankruptcy protection, the trust assets are not in danger.  (Said another way, the trustee holds legal but not beneficial/equitable title to trust property.)
• The actual individual in charge of managing the trust property may change.  If the new person is not acceptable, consider changing trustees if the trust instrument permits it.
• There is no clear way in which trust assets should be invested to weather the financial storm.

Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) and Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.