Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, January 30, 2008

Trustee’s lack of diversification was not unreasonable

New_yorkThe beneficiaries of testamentary and lifetime trusts which were invested in common stock of a closely held business objected to the trustees’ accountings alleging liability for failure to diversify.

The court affirmed the dismissal of the objections, holding that retention did not violate New York’s version of the prudent investor rule because the stock was particularly unmarketable given the capital structure of the corporation, the high dividend payout served the beneficiaries’ needs, the settlors used the trust as a device for insuring that ownership of the corporation remained in the family, and the corporate co-trustee regularly explored selling the stock and kept well informed of the corporation’s financial situation.  In re Hyde, 845 N.Y.S.2d 833 (N.Y. App. Div. 2007).


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