(Formerly Standard 8)
PGTS Standard
12. All revocable trusts where the organization is serving as trustee are separately invested at the specific written direction of the trustor(s). Written directions from the trustor(s) are obtained for all investments of specifically invested revocable trusts. (NADWP S 40 16) [PGTS]
Fiduciary Investment Responsibility
Standard #12 concerns the fiduciary investment of revocable trust funds and applies to all accredited organizations that serve as a trustee. Although standard #12 and NAD WP S40 16 specifically address revocable trusts, these same principles apply to powers of attorney when the organization serves as attorney-in-fact and guardianship when the organization is the legal guardian. So please know that when trustees are referred to in this article, Attorneys-in-fact and guardians are also included.
Fiduciary investment responsibility is a good reason for every organization to review any files carrying current, or possible future, organizational obligations to act as a fiduciary on behalf of a donor. NAD PGTS Standard #37 requires a file review periodically, every five years. Whenever there is a current or possible future fiduciary responsibility, written investment directions are required from the trustor or donor, which can only be obtained while competent and living. This direction signed by the trustor or donor should be voted by your appropriate committees and then placed in the donor’s file. Make sure a copy of this investment instruction document is in all other pertinent files if there are any.
Investment Committees
Each organization should have an investment committee. Often this committee is made up of the same members as their Trust Management Committee (TMC) or Trust Administration Committee (TAC). Still, the membership can be different if the organization so chooses. When dealing with trust assets in which the organization serves as trustee, the committee’s decisions should be guided by the trustor’s written investment directions for the trust. This committee should review and approve, by vote, every investment originated on behalf of the donor by the organization’s personnel. The investment committee does not have to vote for every individual transaction, but they must vote the opening or closing of accounts. The minutes should reflect the voted approvals for these actions.
So, what happens when your organization is the trustee, and the trustor or donor becomes incompetent without having left specific, signed directions regarding the investment of their funds? I am sure this will never happen in your organization, but just in case it does, the investment committee must carefully consider how to invest the trust assets. The investment committee may want to approve an investment policy similar to how the trustor has invested trust assets in the past. A copy of the voted investment policy for this specific trust should be noted in the investment committee’s minutes and placed in the trust file.