Can I assign liquidation triggers based on geopolitical events?

The question of whether you can assign liquidation triggers based on geopolitical events is increasingly relevant in today’s interconnected and volatile world, and a crucial element of a well-rounded estate plan, especially when dealing with significant assets and potential long-term impacts. For clients with diverse portfolios and complex financial situations, incorporating these triggers requires careful consideration of both the legal and practical implications, and is something Steve Bliss, an Estate Planning Attorney in San Diego, frequently discusses with his clients.

What Happens if I Don’t Plan for the Unexpected?

Many people don’t realize the extent to which global events can impact their estate. A sudden, unexpected shift in geopolitical stability – think a major conflict, a trade war escalation, or a significant political upheaval – can dramatically affect asset values. Without pre-defined liquidation triggers, your estate might be left exposed to substantial losses. Statistics show that over 60% of high-net-worth individuals express concern about geopolitical risk impacting their wealth, yet less than 20% have explicitly incorporated these risks into their estate plans. This gap highlights a critical need for proactive planning. Consider Eleanor, a client of Steve’s, who held substantial investments in overseas markets. When tensions rose between two major global powers, her portfolio experienced a rapid decline. Because she hadn’t established clear liquidation guidelines based on these types of events, the losses were significant, and the estate faced considerable complications.

How Can I Protect My Assets from Global Instability?

Establishing clear, objective liquidation triggers is a key step. These triggers shouldn’t be based on subjective opinions but on specific, measurable events. For example, instead of stating “liquidate if there’s political unrest,” you could specify “liquidate holdings in Country X if its sovereign credit rating is downgraded by two levels.” This provides a clear, actionable guideline for your trustee. The California Prudent Investor Act requires trustees to consider not only the current investment landscape but also the potential for future risks, including geopolitical events. A well-crafted estate plan that anticipates these risks demonstrates a commitment to fiduciary duty and safeguards the estate’s long-term interests. You can even integrate tiered triggers – for example, a minor event might trigger a reduction in holdings, while a major event could initiate a full liquidation.

What Legal Considerations Do I Need to Be Aware Of?

While California law generally allows for broad discretion in trust administration, it’s crucial that your liquidation triggers are clearly defined in the trust document. Ambiguous language can lead to disputes among beneficiaries or challenges to the trustee’s actions. Furthermore, the no-contest clause in your trust—which prevents beneficiaries from challenging the trust without probable cause—will only be enforced in specific circumstances. Therefore, clarity and precision are paramount. California is a community property state, meaning all assets acquired during marriage are owned equally. In the event of death, the surviving spouse receives their half of the community property. The “double step-up” in basis is a major tax benefit, meaning that the cost basis of the assets is adjusted to the fair market value at the time of death, potentially eliminating capital gains taxes on future sales. These benefits need to be considered when structuring your estate plan and implementing liquidation triggers.

Can My Trustee Really Act on These Triggers?

Your trustee has a fiduciary duty to act in the best interests of the beneficiaries, and that includes protecting the estate from foreseeable risks. However, they also need clear instructions. A well-drafted estate plan should grant the trustee the explicit authority to liquidate assets based on pre-defined geopolitical triggers. It is also crucial to incorporate a clause that protects the trustee from liability as long as they act in good faith and within the scope of the trust document. Formal probate is required for estates over $184,500 in California. The executor and attorney’s fees are based on a percentage of the estate’s value. For example, a 4% fee on the first $100,000, 3% on the next $100,000, and 1% on everything above that. Probate avoidance through trusts can save substantial costs and time. Recently, a client, James, came to Steve with a complex international portfolio. We worked with his financial advisor to create a detailed set of liquidation triggers based on specific geopolitical indicators. When a major conflict erupted, the triggers were activated, and the portfolio was successfully adjusted, preserving a significant portion of the estate’s value.

Remember, digital assets – emails, social media accounts, online investments – also need to be addressed in your estate plan. Your fiduciary needs explicit authority to access and manage these assets.

Steve Bliss, ESQ. can help you navigate these complex issues and create an estate plan that protects your assets and provides for your loved ones.

Call today at (858) 278-2800 to schedule a consultation.

Don’t leave your estate vulnerable to the unpredictable forces of the global landscape – plan ahead and secure your future with a comprehensive estate plan.