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Trust administration must deal with cybersecurity issues

In California, trustees are fiduciaries in wills, trusts and occasional other legal instruments. Because the trustee holds assets that are passed from one generation to another, trustees and the beneficiaries of the trust instruments are likely targets of cybercriminal enterprises. Because trust administration promises a fiduciary duty, the trustee could end up being legally responsible for the loss of trust assets or data.

The challenge to a responsible trust administration is to keep cybercrimes to a virtual standstill. Trust data has a tendency to be shared among family members and to be used across various platforms and in various transmission protocols. Whenever that kind of sharing occurs, the risk for theft is enhanced. There is always the risk that a family member with important or sensitive data may be tricked and taken over by a social engineering scam.

The target may accidentally fall prey to a download of software that the criminals can use to track the person's movements. The magnitude of the problem pertaining to hijacked personal information is shown by the recent scandal involving Cambridge Analytica and Facebook. This plot to seize files containing the personal data and financial activities of millions of individuals was stymied to some extent by late action to fight the impending nefarious outcome. Persons involved in trust administration or other appropriate security positions got mobilized but the success of their efforts remains to be seen.

There are steps for trustees and owners of wealth to take to avoid disasters so potentially ominous that they could consume their careers and reputations. The background of all advisers, family members and third parties must be thoroughly vetted. Special analysis must be given to the ages of those receiving the data, their technological bent, and the extent of accessibility they require. The quality and effectiveness of all physical and cybersecurity measures in place must be evaluated and made competitive and state-of-the-art. In California and other states, insurance products are being devised and offered that will assist trustees and others to reduce their exposure.

Source: wealthmanagement.com, "Trustees and Cyber Liability", Judith L. Pearson, Jody R. Westby, May 16, 2018

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