Total Return Investing by Trustees

A trust is a relationship in which a designated trustee holds title to assets for the benefit of a designated person called the beneficiary. A trust is typically established when an owner of property (called the settlor) transfers the property to a trustee on terms describing how the trustee is to administer the property to confer the benefits that the settlor intends. Rules of trust law requiring trustees to distinguish between returns on investment as either “income” or “capital,” sometimes result in trustees having to invest inefficiently. For trustees to obtain the maximum advantage for the trust, “total return” investment is necessary. This report considers whether trustees need to be freed from the requirement to select investments with regard to the legal category of the returns they will bring and to have the power to capitalize unspent returns. It is part of a broader project on modernization of the Trustee Act.

Keywords: trusts and trustees, Trustee Act, total return investing, charities, charitable uses, trusts and foundations, wills, estates & life planning, portfolio theory, income, capital, Howe v. Lord Dartmouth, conflict of laws, Trustee Act Modernization Committee

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