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Dec 1, 2008 12:00 PM
There Will Be Litigation
The wonderful power to adjust bestowed upon trustees by the Uniform Principal and Income Act (UPIA) has a dark side: lawsuits filed by beneficiaries unhappy with the results of those decisions. Most states' UPIA statutes are rather new, so the potential for challenge has not yet been realized. But today's difficult economic climate greatly increases the risk that there will be litigation.
Indeed, low interest rates and low capital appreciation are helping create a perfect storm: Fiduciaries may be unsure how to adjust between principal and interest. And — because the power to adjust is applied retrospectively — many trustees are about to make those choices for 2008 based on trust portfolios' performances this past year. Some may mistakenly use their power to adjust to soften the impact of stock market losses on the income beneficiaries. But beneficiaries and other interested parties may be particularly unforgiving and likely to file lawsuits seeking compensation for their dwindling returns and dashed expectations.
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| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
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