Should trustees avoid investing in Cryptoassets?
When making investment decisions, trustees must invest the trust assets in a prudent (conservative) manner, in a way that will result in reasonable growth with minimum risk.
It is well known that digital assets are very risky as their value is extremely volatile.
Bitcoin Evolution 2015-2022
Source: CoinDesk
But should digital assets be considered by Trustees as an investment?
In the past, the answer would be a straight no, unless the trustee had express permission from the Settlor, a release by the beneficiaries, or an authorization in a court order.
Today, potential tax benefits and portfolio diversification may encourage the trustee to accept to deal with digital assets provided that the trustee has the technical knowledge to understand the underlying risks and properly manage digital assets.
Moreover, a trust deed should expressly authorise speculative or hazardous investments and, ideally, digital assets. This will help the trustees to substantiate that they have satisfied their duty of care in making that particular speculative or hazardous investment.
The key test will be to look at the particular investment and establish whether the holding of that investment is justified in the context of the overall portfolio.
Also, the trustee has to make sure to receive a complete Access Plan including an inventory sheet to know which digital assets are going to be held.
Digital assets are changing the way we do everything, including inheritance.
In this new world, trustees should not only fulfil their duties but also become highly technical and into digital assets, great at explaining complex problems, not afraid of asking questions, and learn quickly in order to be able to effectively assist their clients.
