Sep 1, 2005 12:00 PM, By Dominic J. Campisi, principal, Evans, Latham & Campisi, PLC, San Francisco

By: By Dominic J. Campisi, principal, Evans, Latham & Campisi, PLC, San Francisco

Several recent fiduciary cases have results as unexpected as the ending of an O'Henry short story. A Pennsylvania trustee in a case called Sky Trust¹ diversified the assets of a trust out of the trustees' own stock — and was surcharged for its efforts. In SunTrust,² a Georgia co-trustee that followed the beneficiary's direction to invest wholly in tax-free bonds was exonerated from a surcharge — despite missing a 200 percent appreciation enjoyed by sister trusts that had diversified. And in Namik,³ a trustee that disregarded instructions to invest solely in certain U.S. government securities and invested instead in tax-free money market funds, was held liable for resulting estate taxes.

On the surface these decisions seem surprising. Several may be overturned on further appeal. But all raise questions for trustees about investment procedures and documention. Lawsuits and arbitration cases concerning breach of fiduciary duties are increasing in the United States at a compound annual rate of 22 percent, according to the Center for Fiduciary Studies analysis of figures from the National Association of Securities Dealers (NASD). Clearly, fiduciaries should learn to better avoid suits and surcharges.

T&E Premium Content

To read the rest of this article, please login to our Premium Content section:

Registered Web Site Users
User Name:
Password:
Remember Me