Resolving a Trust Asset Allocation Dispute

[d0nuts]

My grandpa passed away and left a tricky situation with his trust. Basically, his girlfriend (who's 60) gets all the income from the assets until she passes away.

Then, the principal goes to his kids, one of whom is my aunt (40). The girlfriend and my aunt are co-trustees, which is where the problem is coming from.
The trust has about $20 million, but almost all of it is in non income producing stocks, because my grandpa was a pretty aggressive speculator.

The girlfriend wants to sell half of it to buy high yield bonds so she has some money to live on, but my aunt disagrees, wanting to protect the principal.
My aunt is wondering how they can resolve this without a huge family fight or having to go to court.

Is there a "rule of thumb" for situations like this to figure out a fair way to manage the money for both the person getting the income and the people who inherit the principal?

Any advice would be a huge help.

 

[Lukaaas]

@d0nuts It looks to me like they may need a neutral fiduciary or mediator before it gets ugly. I guess for that, a balanced portfolio approach could meet income needs without compromising growth potential.

 

[Gustavo Fring]

Hi! @Lukaaas makes a fair point, a mediator could save everyone a lot of grief. @d0nuts this sounds like a textbook case for the "prudent investor rule," where the trust should be managed to balance income for the life tenant and growth for the remaindermen.