As an estate planning attorney in San Diego, I frequently encounter clients who wish to align their investment portfolios with their values, and yes, you absolutely can limit investment in certain industries through careful estate planning and trust provisions.
What are Socially Responsible Investing (SRI) options?
Socially Responsible Investing (SRI), also known as impact investing, has gained considerable traction in recent years, with assets under management reaching over $50 trillion globally in 2022, a 15% increase from 2020. This reflects a growing desire among investors to support companies that prioritize environmental, social, and governance (ESG) factors. Within your estate plan, you can instruct your trustee to only invest in companies that meet specific criteria – perhaps excluding those involved in fossil fuels, tobacco, weapons manufacturing, or any industry that conflicts with your beliefs. It’s not simply about avoiding “bad” companies; it’s about actively supporting those contributing positively to society. Many financial institutions now offer ESG-focused funds and screening tools to help facilitate these preferences, with some funds even excluding companies with poor labor practices or environmental records.
How do trusts help with ethical investing?
Trusts are powerful tools for implementing these ethical considerations, offering more control than simply a will. A properly drafted trust document can explicitly outline your desired investment restrictions. For instance, you might specify, “No trust funds shall be invested in companies deriving more than 10% of their revenue from coal mining.” This provides clear guidance to the trustee, ensuring your values are upheld even after your passing. Furthermore, trusts can be structured to prioritize investments in specific sectors – renewable energy, sustainable agriculture, or affordable housing – aligning your financial legacy with your commitment to these areas. Remember, a trustee has a fiduciary duty to act in the best interest of the beneficiaries, but within those bounds, they must adhere to any lawful and clearly defined restrictions outlined in the trust document.
What happened when a client’s wishes weren’t clearly defined?
I recall a case involving a long-time client, Eleanor, a passionate environmental advocate. She verbally expressed her strong aversion to investing in oil companies but never formally documented it in her estate plan. After her passing, her trustee, unaware of her preferences, continued to invest a significant portion of her estate in fossil fuel stocks, believing it was the most financially prudent course of action. Her children, equally committed to environmental causes, were devastated. The ensuing legal battle to redirect the investments was costly, time-consuming, and emotionally draining. It highlighted the critical importance of clearly articulating your values in writing, providing unambiguous instructions to your trustee.
How did careful planning help another client achieve their goals?
Another client, Mr. Davies, a staunch advocate for peace, wanted to ensure his estate wouldn’t indirectly support the defense industry. We crafted a trust that specifically prohibited investment in companies involved in the manufacture or sale of weapons. We didn’t just exclude direct weapon manufacturers; we also screened for companies providing substantial support services or components. The trust outlined a positive investment strategy focusing on companies promoting education, healthcare, and sustainable development. Years later, his family reported that his estate was not only financially secure but also aligned with his deeply held values, providing them with a sense of peace and fulfillment. He felt that he not only left a financial legacy but a moral one too.
“Leaving a legacy isn’t about how much you leave, it’s about what you stand for.”
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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