What duties does a lawyer/trustee have to develop strategies for the retention and disposition of assets within a reasonable amount of time after accepting a trusteeship?

We examine certain issues surrounding trustee duty to formulate and implement, within a reasonable amount of time after accepting a trusteeship, strategies for the retention and disposition of assets. In discharging the duties of the office, the trustee looks primarily to the provisions of the trust instrument, and secondarily to applicable statutes and court precedents. Many trusts, however, have broadly drafted permissive language granting the trustee “absolute discretion” regarding the decision to sell or retain inception assets. Likewise, Maryland’s Prudent Investor Rule differs from the statutes adopted by other states as well as from the Uniform Prudent Investor Act in its guidelines for review of trustee investment decisions. Absent cases providing clear guidance for trustees electing “Prudent Investor” status with the Commissioner of Financial Regulation, we consider possible consequences of trustee decisions regarding inception assets lest the lawyer-trustee inadvertently fall victim to unforeseen litigation perils. Furthermore, having considered critical issues prior to accepting a co-trusteeship with either a family or commercial trustee, the lawyer is in a better position either to reject a nomination to assume trusteeship if he or she is uncomfortable with the proposed co-trustee’s policies; or, having accepted, to protect the interests of the beneficiaries.

Although courts will certainly wish to give effect to the language of trust instruments that combine broad discretionary powers with exculpatory clauses, it is not certain that they will do so by providing trustees with a blanket license for imprudent conduct with respect to inception assets. Indeed, the well-established principle of law stating that trust language is not dispositive (i.e., the trustor cannot waive certain fundamental duties of the trustee), should give pause to trustees who rely merely on boilerplate language to formulate guidelines for trust administration and asset management.

Download The Lawyer as Trustee: Duty With Respect to Inception Assets.

This article was co-authored by Mark G. Griffin, Esq. and Patrick J. Collins Ph.D., CLU, CFA.