Protecting Your Client’s Portfolio Against the Risks of InflationProtecting Your Client’s Portfolio Against the Risks of Inflation
One strategy to avoid eroding the value of annual distributions and property within a trust
For beneficiaries of trusts, an increase in inflation is a significant risk because it can erode the effective value of annual distributions and the property within a trust. While inflation has been low recently, it’s prudent for fiduciaries to understand how it affects trusts and to consider adding inflation-sensitive assets, if appropriate.
For most of the past decade, trusts have benefited from extremely low inflation. Consumer prices rose less than 1 percent last year and have topped 3 percent only twice since 2005. While inflation is unlikely to skyrocket, consumer prices could begin to move higher as the U.S. and global economies improve. The potential for higher inflation underscores the need to safeguard portfolios. Even moderatel...
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