With heatwaves, droughts, wildfires, and extreme storms all increasing in frequency, climate change, once thought as a potential future problem, appears to be more widely recognized as a “now” problem. As unusual as it sounds, climate change should be considered by fiduciaries in certain trust administrations.

Trustees are required to act reasonably, in good faith and in the best interest of the beneficiaries. Though a standard of perfection is not imposed, trustees should recognize foreseeable risk and take reasonable steps to protect trust property. A recent article looks at various steps that trustees should consider taking to protect assets from climate-related risks. I touch upon some of these below:

• Understand the assets and the risk to them: Understanding the trust assets and how they may be impacted by climate change can help a trustee to take action. For instance, if a trust owns a property in a hurricane zone, a trustee may choose to reinforce or modify it.
• Understand insurance options: A trustee with assets subject to climate-related risks should evaluate whether there is insurance available. If an insurance company will not insure against certain harms, it may be because the potential losses are greater than the premiums. A trustee may consider liquidating the asset to avoid exposing the trust and him/herself to future risk or claims.
• Communicate and contemporaneously document decisions: Trustees needs to be able to explain their reasoning if any of their important decisions are challenged. In the context of property subject to climate risks, it would be helpful to document the risks and the options, and to discuss them with the beneficiaries. To keep the beneficiaries fully informed often will be protective for a trustee (e.g. a beneficiary may acknowledge a specific risk and nonetheless agree to forgoing protective action).
• Keep up with climate data: A trustee holding property that is subject to foreseeable climate risks should stay informed about climate trends, data, and forecasts so such risks can be identified and addressed.

In addition to these administration-related considerations, the article reminds estate planning lawyers that climate change can affect more than a client’s vacation home or family farming business. It can also impact investments a client holds in a variety of public or private companies. It is thus important for estate planners, and trustees alike, to give common sense consideration to the issue of climate change as they work to protect and preserve the assets now and into the future.

Thanks for reading and have a great weekend,

Natalia Angelini