Serving Clients In An Evolving Fiduciary Landscape

Exercise of discretionary distribution powers may need to be recalibrated in the face of market uncertainty.

Trustees may be faced with situations where one or more beneficiaries’ health needs or loss of employment may disrupt the established pattern of distributions within families. Trustees may need to limit the class of beneficiaries receiving distributions for some period of time or distributions may need to increase or decrease in the wake of COVID-19.

If so, it is important to approach those requests with empathy when families are facing unexpected illness, loss of employment and a decline in the values of personal assets.

COVID-19 is the first real test of business continuity plans for many companies. Trustees should participate in critical planning for the company to protect and enhance the value of trust assets for the benefit of beneficiaries. Trustees are in an excellent position to share insights with management and participate in tactical and strategic assessments coming out of the crisis.

For real estate held in trust, trustees are likely to face requests from tenants for rent concessions. During this period of extreme market disruption, trustees well may determine that entering into rent concessions to secure existing tenants is prudent especially when the alternative would be an increase in vacancies.

Doing so may allow the grantor to further shift appreciation out of their estate.

During the COVID-19 pandemic, fear may cause some beneficiaries to request their investments be liquidated, or even “brought to cash.” As beneficiaries may request changes driven by emotion, a prudent trustee should rely upon data. Data often reinforces the dangers of market timing, made more perilous in periods of extreme volatility.