Investment-Direction Agreement: Key Insights and Legal Implications

Definition & Meaning

An investment-direction agreement is a legal contract where a trustee commits to maintaining the current investment strategy of a trust without diversifying its assets. While the trustee has the authority to diversify investments, this agreement specifies that they will not do so. In return, the beneficiary agrees to absolve the trustee of any responsibility for losses that may arise from this lack of diversification.

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Legal Use & context

This term is commonly used in trust and estate law, particularly in the management of trusts. It is relevant in situations where beneficiaries prefer a specific investment strategy and want to limit the trustee's ability to change that strategy. Users may find legal forms related to investment-direction agreements useful for creating or modifying such contracts, allowing them to manage their trust assets effectively.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A family trust is established to manage a portfolio of real estate properties. The beneficiaries prefer that the trustee does not sell any properties or invest in stocks. They create an investment-direction agreement to ensure the trustee adheres to this strategy.

Example 2: (hypothetical example) A trust holds a collection of rare art. The beneficiaries want to keep the collection intact and agree with the trustee not to sell or trade any pieces, formalizing this in an investment-direction agreement.

State-by-state differences

State	Variation
California	Investment-direction agreements must be explicitly stated in the trust document.
New York	Trustees have a fiduciary duty to act in the best interest of beneficiaries, which may affect the enforceability of such agreements.
Texas	Investment-direction agreements are recognized but must comply with state trust laws.

This is not a complete list. State laws vary, and users should consult local rules for specific guidance.

Common misunderstandings

What to do if this term applies to you

If you are a beneficiary or trustee considering an investment-direction agreement, it is important to:

Review the trust document carefully to understand the terms.
Consult with a legal professional to ensure the agreement is properly drafted and enforceable.
Consider using US Legal Forms to find templates that can help you create this agreement effectively.

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Quick facts

Attribute	Details
Typical Fees	Varies by state and complexity of the trust.
Jurisdiction	State-specific trust laws apply.
Possible Penalties	Trustees may face legal action for breaching fiduciary duties.