Estates, Trusts, & Climate Change: What’s Your Role as a Legal Professional?


By: HeirSearch.

Climate change is increasingly becoming a significant concern for individuals and organizations worldwide. It presents a range of challenges, not only to our physical world but to the financial and legal sectors.

As a legal and trust professional, clients may ask you how climate change affects their assets and their estates’ beneficiaries. This month’s article will outline some of the key climate-related considerations you should be aware of when speaking with your clients and guiding them through developing and implementing their estate and trust plans.

How Secure is Real Estate?

Many trusts include property, ranging from a primary residence to vacation or commercial properties. While a vacation home on the coast in Florida may provide a welcome escape from a New York winter, as a trust advisor, it’s essential to consider how changes in storm patterns or the need for more frequent repairs could impact the value of your client’s property.

Similarly, a commercial property in sunny California may see its future value compromised should it be impacted by the rise in frequency and intensity of wildfires.

In both examples, it’s critical to understand the asset’s insurance and how your client’s estate would be compensated should the property succumb to an extreme climate event.

If sufficient insurance is unavailable, the day may come when you and your client discuss selling the property to preserve the value of their trust or estate.

The Role of Business & Policy

For many people, likely including yourself, investments in the oil and gas sector have continued to play a role in creating diverse investment portfolios. However, industry changes could impact the sector’s historical influence.

For example, changes to the regulatory environment could limit the viability of oil and gas should governments around the world restrict their extraction and use.

The private sector can also impact this industry, as some banks and investment firms turn towards renewable and carbon-neutral alternatives.

These actions, many of which are already happening, could negatively impact your client’s financial assets. Therefore, as a legal and trust professional, keeping up-to-date on regulatory and market trends in this field will enable you to discuss possible alternatives with your clients.

Appetite for Change

Every generation has a slightly different way of understanding the world. What was a concern for those born in the 1960s is only sometimes relevant to those born in the early 2000s.

As we learned last month, Dynasty Trusts can last for decades. Should you manage a multigenerational trust, you will need to pay particular attention to the changing outlooks and expectations of the beneficiaries.

Many members of the Millennial and Generation Z generations have become increasingly concerned about their impact on the environment. They want to ensure that their assets are used responsibly and sustainably, often leading to fewer investments in traditional assets.

As an estate and trust professional, your clients rely on you to help them align their estate and trust plans with their values and ethical considerations. For multigenerational trusts, there is the added challenge of managing the expectations of more than one generation within the same trust.

Engage all beneficiaries early to understand their plans and expectations. A transparent and proactive conversation can go a long way in establishing a strategy that can work for everyone.

Changing Technology

It’s not just consumer appetite or government policy that can shift the investment landscape. Technology plays a significant role in influencing which industries are profitable and which are not.

A new advancement in technology could create a variety of outcomes, be it an increase in demand for oil and gas or, on the other end of the spectrum, a new source of energy that transforms how we power our world.

What’s important to remember is how vital it is that you are aware of new technologies. Having an eye on the latest trends will help you guide your clients to make the soundest decisions for their estate.

Estates & Trusts to Weather the Storm

While it’s impossible to know exactly how our changing climate may impact our world and finances, more and more clients will question if—and how—they should adapt their estate and trust plans. By taking these considerations into account, you can feel more prepared to address your client’s questions or confidently bring these risks up as part of your financial reviews.

Your role as legal and trust professionals is to ensure your client’s assets’ long-term security and sustainability. By incorporating sustainable and responsible investment strategies, you can empower your clients to maintain their and their beneficiaries’ financial well-being for generations to come.

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