Your trust likely has an investment standard — a prudent person or a prudent investor standard. But what are the differences between the two? See below.
Prudent Person Standard
A prudent person standard means your successor trustee needs to invest your assets prudently. In other words, your successor trustee cannot invest in assets that are not going to be relatively safe. Hundreds of years ago, “legal lists” were official lists that you could invest in as a fiduciary, such as government bonds or gold. This morphed into the prudent person rule. As long as you are invested in these ultra-safe investments, you’re okay. However, this may not provide the highest return.
Prudent Investor Standard
Looking at a prudent investor standard on the other hand, your successor trustee may invest in a riskier investment if it makes sense in your overall portfolio of investments. So, even if you have a very small amount of a riskier asset, it may make sense because it could boost the overall return of your portfolio.
If you would like assistance determining what your trust requires of its successor trustee, contact us for an estate plan review today.
