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Can a trustee delegate investment authority?

The main purpose that many in Mokena have for setting up trusts is to help generate income for beneficiaries. That income typically comes through investments made using trust property and/or assets. The requirements placed on trustees by the Prudent Investor Rule have been detailed on this blog in the past. Yet what of the trustee managing the trust that you are a party to does have expertise in investing. Do you want him or her making decision that could potentially impact what could be your income? 

In cases where a trustee doubts his or her ability to consistently make sound investment decisions, he or she can delegate investment authority to another. Again, however, there are guidelines regulating this delegation to ensure it is done property. You may want to familiarize yourself with them in order to hold your trustee accountable

Per the Illinois Trust and Trustees Act, the trustee must first inform you and the other beneficiaries or interested parties of the trust of his or her intention to delegate his or her investment authority. Once that is done, he or she is also required to: 

  • Exercise all reasonable care, skill and caution in selecting an investment agent or firm 
  • Conduct a thorough inquiry into said agent or firm's experience, performance history and professional licensing
  • Ensure that the agent or firm is subject to the jurisdiction of Illinois state courts
  • Hold the agent or firm accountable to the standards of the Prudent Investor Rule

The chosen agent or firm is then liable to you and other interested parties for any losses due to violations of its duty as a prudent investor. So too would be the trustee if he or she did not comply with the requirements mandated when delegating his or her authority. 

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Zapolis & Associates, P.C.
9991 191st Street
Mokena, IL 60448

Phone: 708-390-8936
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