Absolutely, you can, and increasingly, individuals are utilizing the power of trust terms to align their financial holdings with their values—a practice known as socially responsible investing (SRI) or impact investing. This allows grantors – those creating the trust – to specify which sectors or industries their trust funds should avoid, effectively preventing investment in companies engaged in activities they deem unethical or harmful. This isn’t simply about personal preference; it’s about leveraging estate planning to extend one’s values beyond their lifetime and ensuring that inherited wealth doesn’t inadvertently support practices they oppose. According to a 2023 report by the Forum for Sustainable and Responsible Investment, over $8.4 trillion is now invested according to SRI strategies in the US alone, demonstrating a clear and growing demand for values-based investing.
What happens if I don’t specify investment restrictions in my trust?
Without clear instructions, a trustee is generally bound by the prudent investor rule, meaning they must act with the care, skill, prudence, and diligence that a prudent person acting in a like capacity would use. This often prioritizes financial return, and ethical considerations may not be a primary factor. While many trustees are receptive to considering a beneficiary’s wishes, they aren’t legally obligated to do so unless explicitly stated in the trust document. Consider that roughly 65% of high-net-worth individuals express a desire to integrate their values into their investments, yet a significant percentage fail to document these preferences formally. This can lead to frustration and even legal disputes if investments are made that conflict with the beneficiary’s or grantor’s beliefs.
How detailed can these investment prohibitions be?
The level of detail is remarkably flexible. You can broadly exclude entire sectors like fossil fuels, tobacco, or weapons manufacturing. Or, you can get extremely specific, prohibiting investment in companies with poor environmental records, those involved in predatory lending practices, or even those that don’t meet certain labor standards. For instance, a grantor might specify “no investments in companies deriving more than 10% of their revenue from coal mining” or “no investments in companies with a history of significant environmental violations.” The key is to be clear and unambiguous in your language, avoiding vague terms that could be open to interpretation. Some trusts even incorporate “negative screens” – actively excluding certain investments – alongside “positive screens” – actively seeking out investments that align with specific values.
I heard about a family dispute over a trust and investments, what happened?
Old Man Hemlock was a staunch environmentalist, but his trust document was silent on investment preferences. He left a substantial estate to his two sons, both of whom were surprised to discover significant holdings in oil and gas companies. The elder son, a committed climate activist, was horrified. He argued that his father would have never wanted his money funding the very industries he spent his life opposing. A bitter legal battle ensued, costing the estate tens of thousands of dollars in legal fees. The courts ultimately sided with the trustee, who argued they were simply fulfilling their fiduciary duty to maximize financial returns, as the trust didn’t specify any ethical considerations. It was a painful lesson, highlighting the importance of proactive planning.
How did another family avoid similar problems?
The Andersons, deeply committed to sustainable agriculture, worked with an estate planning attorney to craft a trust that explicitly prohibited investment in companies using harmful pesticides or engaging in factory farming practices. They also directed the trustee to prioritize investments in organic farming and renewable energy initiatives. Years later, after their passing, their children were relieved to see the trust funds aligned with their parents’ values, supporting companies actively working to protect the environment. The attorney had worked with them to create a detailed “Statement of Investment Principles” attached to the trust, outlining their ethical preferences and providing clear guidance for the trustee. This clarity prevented any disputes and ensured the estate was managed in a way that honored their legacy. It’s a powerful example of how thoughtful estate planning can extend one’s values for generations.
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
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Map To Steve Bliss Law in Temecula:
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Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “How can I ensure my estate plan aligns with my financial goals?” Or “What happens to jointly owned property during probate?” or “How is a living trust different from a will? and even: “Will my wages be garnished during bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.