Probate & Trust Law Section Conference Manual ... - Minnesota CLE

purchasing the insurance but determined that it was too expensive in light
of the less than 1% chance of incurring hurricane damage.
6. In the Matter of the Mark C.H. Discretionary Trust, 956 N.Y.S.2d 856
(N.Y. Surr. Ct. 2012). Although distributions were to be made in the
trustee’s sole discretion, trustees violated fiduciary duties by failing to
inquire into beneficiary’s condition and for failing to make
distributions. Settlor died at age 85, survived by two adopted sons, one
of which was 16 and severely handicapped. Settlor established a
supplemental needs trust, naming her estate planning attorney and a
corporate trustee as trustees. The trust was a multimillion dollar trust;
however, in the first five years, $3,525 was spent on the care of the
beneficiary, approximately 0.1%. After “some initial missteps”, which
included failing to visit the beneficiary, the trustees hired a care specialist
to assist the trustees. With the services of the care specialist and the use of
the trust funds for the benefit of the beneficiary, the beneficiary’s
condition significantly improved. The Court stated that it is fundamental
that the trustee take on obligations beyond those imposed in ordinary
relationships and that the words “absolute discretion” do not insulate the
trustees from their duties. The trustees had a duty to inquire into the
beneficiary’s condition and apply the trust assets to improve his condition.
The failure to exercise the trustees’ discretion was an abuse.
G. Prudent Investor Rule
1. Matter of Hunter, 100 A.D.3d 996 (N.Y. App. Div. 2012). The
corporate trustee violated the prudent investor rule when it
maintained a significant concentration of stock for over 20 years.
JPMorgan Chase Bank served as the executor of the estate of the decedent,
as well as a trustee of two separate testamentary trusts established by the
decedent, referred to as the Eighth (A) Trust and the Eighth (B) Trust.
Following the probate of the decedent’s estate in 1973, the subject trusts
were funded almost entirely with Kodak stock. Pursuant to the terms of
the trusts, the remaining trust assets of the Eighth (A) Trust were
transferred to the Eighth (B) Trust in 1980. At issue was the corporate
trustee’s management of the Eighth (B) Trust, which was established for
the benefit of the decedent’s granddaughter, who was deceased, and
whether the corporate trustee violated the prudent investor rule. The court
determined that in maintaining a concentration of Kodak stock in the
Eighth (B) Trust for more than 20 years, during which the value of the
Kodak stock declined precipitously, the corporate trustee violated the
prudent investor rule.
2. In the Matter of the Judicial Settlement of the Intermediate Account
of HSBC Bank USA, N.A., 947 N.Y.S.2d 288 (N.Y. App. Div. 2012).
The corporate trustee violated the prudent investor rule when it
maintained a significant concentration of stock for over 20 years.
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