The question of whether a financial advisor can manage assets within a testamentary trust is a common one, particularly for those nearing estate planning stages or recently experiencing the loss of a loved one. A testamentary trust is created *within* a will and comes into effect *after* death, unlike a living or revocable trust which exists during the grantor’s lifetime. While a financial advisor doesn’t directly “manage” the trust itself – that responsibility falls to a trustee – they absolutely can, and often do, manage the *assets* held *within* the trust, provided the trust document allows it and appropriate legal frameworks are followed. This management includes investment decisions, rebalancing portfolios, and ensuring the assets are aligned with the trust’s objectives and the beneficiary’s needs, it’s a crucial distinction and understanding it is paramount for both trustees and beneficiaries. According to a study by Cerulli Associates, roughly 70% of affluent households utilize financial advisors, highlighting the prevalence of professional asset management even outside of trust contexts.
What are the trustee’s responsibilities when hiring a financial advisor?
The trustee holds a fiduciary duty, meaning they are legally obligated to act in the best interests of the beneficiaries. When deciding to engage a financial advisor to manage trust assets, the trustee must exercise prudence and due diligence. This includes thoroughly vetting potential advisors, understanding their fee structure, and confirming their qualifications and experience in managing trusts. A trustee *cannot* simply delegate all responsibility; they must actively monitor the advisor’s performance and ensure alignment with the trust’s goals. It’s essential the trustee understands that while the advisor manages investments, the trustee retains ultimate responsibility for oversight, and distribution of assets. A poorly chosen advisor or lack of oversight can lead to significant financial losses and potential legal repercussions, with estimated losses due to mismanagement reaching billions annually.
How does a financial advisor differ from a trust company?
While both financial advisors and trust companies can manage assets, they operate differently. A trust company is a financial institution specifically authorized to act as a trustee, holding legal title to assets and bearing full fiduciary responsibility. A financial advisor, on the other hand, typically provides investment advice and manages assets on behalf of a trustee who retains legal title. The key difference is control and liability. A trust company assumes full responsibility; a financial advisor provides a service *to* the trustee. Many individuals mistakenly believe these roles are interchangeable, which can lead to confusion and potential conflicts. According to the National Association of Personal Financial Advisors, approximately 85% of financial advisors work as fiduciaries, but it’s vital to confirm this status.
What happens if a trust document restricts advisor access?
Trust documents are incredibly specific, and some may explicitly restrict the trustee’s ability to engage a financial advisor or dictate certain criteria the advisor must meet. For example, the document might require the advisor to be a Certified Financial Planner (CFP) or have a certain level of experience with trusts. If the trust document is silent on the matter, the trustee generally has broad discretion, but still must act prudently. I recall a situation where a client’s mother, a meticulous planner, had a testamentary trust established, but the document explicitly forbade any external investment advisor unless specifically named within the trust itself. This created a significant hurdle for the executor, as they wished to leverage professional expertise. They ended up seeking a court order to modify the trust’s terms, a costly and time-consuming process.
Can a properly managed trust avoid probate with a financial advisor?
A testamentary trust, by its very nature, is created *within* a will and therefore doesn’t avoid probate itself. Probate is the legal process of validating a will and distributing assets, and assets held within a testamentary trust are still subject to this process initially. However, once the trust is funded after probate, the assets *within* the trust are managed according to the trust terms, *outside* of probate court. This provides a layer of privacy and control not offered by simply naming beneficiaries in a will. It’s crucial to remember that proper funding of the trust after probate is essential. I once assisted a family where a testamentary trust was established, but the estate administrator neglected to transfer assets into the trust post-probate. This resulted in the assets remaining subject to estate taxes and ongoing court supervision. The family eventually had to petition the court to rectify the situation, causing significant delays and legal expenses. Fortunately, they were able to resolve the issue, but it highlighted the importance of meticulous execution and ongoing management of a testamentary trust in collaboration with a trusted financial advisor and estate attorney.
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About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
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