A will which directed that a trust be created at the donor’s death, released the trustee from losses resulting from the trustee’s failure to diversify the trust investments (which were heavily concentrated at the time the trust was created in the stock of one company). The trustee was, however, directed to sell the investments for compelling reasons. The court, using its own analysis, found that the trustee’s failure to sell the stock of that one company as the value declined by more than 17% over a specific period, coupled with the fact that the trust’s investments returned less than half of the Standard and Poor’s index, was negligent and refused to dismiss a lawsuit seeking recovery based on that negligence. (7/04) Update. In February 2006, the Appellate Division, Fourth Department, unanimously reversed the lower Surrogate’s Court finding and held that the trustee committed no wrong in failing to sell the stock at issue. The court agreed with the Surrogate in finding that the heirs objecting to the trustees conduct did not establish a basis for recovery based on the allegations in the petition, but did not agree that the Surrogate could, on its own and absent allegations by the heirs, determine that the trustee was negligent. The Appellate Division objected to the Surrogate’s decision as being based on hindsight and found that holding the stock was not a bad decision, based on impartial investment information. (2/06)
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