Quora Answer: What is the Best Way to Manage Trust Fund Money?

The following is my answer to a Quora question: “What is the best way to manage trust fund money?” 

That depends on the type, and nature of the trust.  People set up trusts for a variety of reasons from tax mitigation to legacy planning.  All this dictates the investment horizon, management structure, and even the compensation of the trustees.  At a fundamental level, however, there has to be good mix of financial instruments, and asset classes.  This requires a trustee or manager who understands finance and investments.  The assets need to be diversified enough that political, market and currency risks are mitigated, and yet maintain sufficient levels of liquidity when required to pay out to the beneficiaries or settlor. 

There should also be a good understanding of legal requirements, and management responsibility.  One of the best ways to address this is to have a trust company manage the trust, instead of simply having two or more trustees.  This creates a legal entity that can transparently engage the services of tax accountants, lawyers and any other type of specialist with some transparency.  An alternative would be to engage an investment bank to manage the fund, but their fees are expensive, and the trust has to be significant. 

If the question is from the perspective of a beneficiary, then the considerations are towards asset management.  Putting aside some of the funds received for investment and savings is a significant step towards growing wealth.  Insurance policies address liability protection and creates an instant estate in an inclement condition.  Putting some funds in the right collective investment scheme, and creating a portfolio of assets across several classes from equity instruments, debt instruments and property will eventually create a passive income stream.  All that aside, it is very important not to flaunt what you have, and surround yourself with the wrong sort of people who will petition you to “invest” in all manner of dubious businesses.