6 Steps to Take When You Receive a Trust Fund Part 1 of 2

Inheriting property, family possessions or a trust fund presents mixed emotions, responsibilities and opportunities. Acknowledging these changes is an empowering first step to successfully managing a large inheritance. These changes are normal and acknowledging them is an empowering first step to managing the responsibilities that come with a large inheritance. In this two-part article, I will focus on trust fund inheritances as these often have complex legalities associated with them.

In my experience as a financial planner working with beneficiaries, I have created a short list of things to do to familiarize yourself with your trust fund. Knowledge is power, and informing yourself is the key to long-term success.

1) Read the Trust Documents:
When you first learned of your trust fund, you likely received a stack of legal documents. Undoubtedly, understanding these documents can feel like a daunting task. But reading through the legal documents is an important first step to comprehending the terms your inheritance. While you read the documents, you may find there are legal terms and jargon you may not understand – this is alright! Even without a legal background, there is plenty you can learn if you take the time to read through the documents. Important aspects to learn are:

- The origin of the assets
- The stipulations of the inheritance (how can the money be used?)
- Who is in charge of administering the money

By reading the documents, you may realize you have more or less control of your inheritance than you originally thought. Taking this important first step will give you a starting point for thoroughly understanding your inheritance.

2) Meet with the Trustee
The trustee is the person(s) or corporation that is responsible for administering the inheritance in accordance with the terms of the trust. These terms are spelled out in the trust documents. Trusts, like wills, come with various stipulations for the beneficiaries based on the wishes of the person who left the inheritance (also known as the Grantor).

Once the Grantor passes, the Trustee is responsible for administering the trust for you as the beneficiary. Important aspects of the Trustee to beneficiary relationship to learn are:

- The Trustee’s role in the inheritance
- The duties they must fulfill
- The fees they are receiving for their services, if any

A strong working relationship with your Trustee is essential to your long term success; ensure that you are on the same page with your Trustee and have a mutual understanding in regards to the expectations of your inheritance.

3) Review the investments
If your trust fund contains investments in stocks or bonds, it is likely your inheritance is being managed by an investment advisor. If so, meeting with your investment advisor to understand the investments is an important next step. While it may not be necessary to become an investment professional yourself, a basic understanding of how your money is invested is important. It is also crucial to think about your risk appetite; the amount of risk you are willing to take with your money. There is always inherent risk in investing money and determining how much risk you are willing to take for the reward you are seeking should help shape how your money is invested. Here are three main questions to ask your investment advisor:

a) “Are you a Fiduciary?” The term Fiduciary means the person responsible for managing the investments has a legal responsibility to do what is in YOUR best interest. It is crucial to determine if your investment advisor is acting in a fiduciary capacity as it relates to your inheritance – you want your goals and your investment advisor’s goals aligned.

b) “Do you give independent investment advice?” Independent investment advice means the person managing your money is not beholden to any propriety investment products or solutions. Having an independent advisor is equally important to your long-term success. Many investment companies have their own, proprietary products (which may have higher than average fees) which may present a conflict of interest. You may want to ask yourself, “how can my advisor represent me in a fiduciary capacity (act in my best interest) while also investing my money in investment products that he/she is commissioned to sell?” This potential conflict of interest is something you should work out in your relationship. If you feel there may be a conflict of interest, seeking a second opinion from an independent investment advisor is a logical and potentially necessary next step.

c) “Are these investments best suited for my financial goals?” Often, if you receive an inheritance, the investments you received were originally in place for the Grantor. While those investments may have been appropriate for that person, they may not be best suited for your financial goals. If your investment advisor has the ability to change the investments within your account(s), it may be necessary to do so. Maybe you are more risk averse or have a longer time horizon for your financial future as compared to the Grantor; as such, work with your investment advisor to create a portfolio of investments that best fit your wishes.

I hope you find this article helpful, please check-in next month for Part 2. As always, if you have inheritance or trust fund related questions, please contact Eric for assistance.

By Eric Schulkin
Investment Advisor Representative


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.

Gerber Kawasaki, 2716 Ocean Park Blvd. #2022 Santa Monica, CA 90405. Contact us at (310) 441-9393.