Over the next decade, trillions of dollars will transfer hands through family managed trusts in an effort to preserve and distribute family assets. Generally a volunteer or designated family members act as the managers of the trust. With a sense of duty, the trust manager carries out the tasks at hand with the very best of intentions. Unfortunately, the best intentions don't always result in the desired outcome for each and all. As a result, trust managers are increasingly finding themselves faced with legal suits for alleged breach of duty.

How can you protect yourself and your family members from this type of personal liability? Some insurance providers, such as Firemans Fund, have developed a liability coverage to address this very issue.

What types of loss scenarios are covered?

Potential loss scenarios:

• Monetary loss from failure to follow covenants of the trust
• Dispersing funds to other than intended beneficiaries
• Omitting a specified beneficiary
• Forfeiture of funds from the unintentional violation of a regulation or statute
• Failure to secure insurance coverage for physical assets of the trust resulting in an uninsured loss
• Failure to take reasonable steps to maintain physical assets of the trust, resulting in a loss of value
• Failure to take reasonable care when allowing third parties to administer funds resulting in monetary loss

Am I Eligible?

This liability coverage is designed for a trustee that is related by blood, marriage or adoption, or is a legal guardian of the beneficiary. Ineligible trusts include:

A trust where the named insured are the sole beneficiaries Trusts that create non-profit charitable foundations administered by a board of directors Foreign trusts created outside of the U.S. Unrelated third parties

While this coverage may sound new and unique, it has been around since the 1930s. Trust management liability insurance is essentially a redesigned directors and officers liability coverage, which is designed to protect directors and managers from their personal liability assumed with their work related duties.

The use of trusts is on the rise, and so are trust management related suits. The good news is that you can protect yourself fairly easily. To determine if this type of coverage makes sense given your unique situation, be sure to consult an independent insurance agent and your estate planning professional.