Treatment of Trust Property

Chapter 9—Treatment of Trust Property

 

 

The most important aspect of the trust is the trust property. The primary purpose for creating a trust is to provide for the needs of the beneficiaries. That goal cannot be accomplished if the trust property is destroyed or depleted. The trustee is responsible for collecting and protecting the trust property. He or she has the legal title to the property and owes a fiduciary duty to the beneficiary of the trust to preserve the property. In addition, the trustee has a duty to prudently invest the trust property in order to ensure that the income is sufficient to meet the needs of the beneficiaries.

 

9.1 The Duty to Collect and Protect Trust Property

 

 

When the testator dies, the testator is legally obligated to obtain possession of the trust assets from the executor of the estate as soon as it is feasible. After he receives the property, the trustee is required to examine the property tendered to make sure it corresponds with the property listed in the trust instrument. In the event there is a problem with the trust property, the trustee has duty to challenge the executor, including filing a law suit to make sure that the trust property is restored. For instance, O leaves $400,000 to A in trust for the benefit of B. After O dies, O’s executor notifies A and B about the existence of the trust, and delivers the money to A. If A receives $300,000 instead of the $400,000 mentioned in the trust instrument, A has a duty to resolve the discrepancy with O’s executor. Once the trustee receives the trust property, that person has a duty to protect the property. The steps the trustee must take to preserve the trust property depend on the nature of the property. If the property in the trust is a house, the trustee has duty to do things like keeping the house in good repair and paying the necessary taxes. For trusts that are funded by money, the trustee has the duty to invest the principle in order to make enough money, so that the beneficiary receives the necessary income.

 

9.2 The Duty to Earmark Trust Property and to Not Comingle Trust Funds

 

 

Once the trustee obtains the trust property, he has a duty to earmark the property as belonging to the trust. For example, if A receives a house to hold in trust for B, A must put the trust’s name on the deed instead of his own name. The purpose of this requirement is to prevent the trust property from being attached by the trustee’s creditors. Thus, the trustee must make it clear that he owns the house as trustee and not as an individual. The trustee is not obligated to earmark certain types of securities. If the trustee fails to earmark the trust property, he is only liable for any losses that result from his failure to earmark. Consider the following example: O gives A an apartment building to hold in trust to pay the income from the rents to B for life. A records the deed to the apartment building in his name. A few years later, the main employer in the area goes out of business, so people leave the area to find new jobs. As a result, the vacancy rate in the apartment building rises to 90% and the trust loses substantial revenue. The trustee is not liable for the loss because it was a result of the general economic conditions in the area. On the other hand, if one of A’s creditor is able to attach a lien to the property, A would be responsible for any loss that occurs.

 

The duty to not comingle is similar to the duty to earmark. The trustee must keep the trust property separate from his own property. Consequently, if O leaves $400,000 in trust to A for the benefit of B, A cannot legally place that money in A’s bank account. Instead, A is obligated to place the money in a separate trust account. Nonetheless, A is only liable for the loss the trust suffers as a result of the comingling. Thus, if A places the money in his bank account and his creditors are able to get it, A is liable to the trust for the amount of the loss. Nonetheless, if the trust loses money because the bank goes out of business or some one steals the fund, the trustee is not responsible for the loss. Litigation over breaches of the duty not to comingle usually involves individual trustees. Some jurisdictions permit corporate trustees to comingle trust funds by statute or common law. The rationale behind this position is to encourage corporate entities to manage small trusts by being able to pool trust resources.

 

Earmarking vs. Comingling

 

The students often confuse violations of the duties to earmark and to not comingle. The simple way to look at is to focus upon the trustee’s actions. When the trustee fails to earmark, he treats the trust property like it is his property. Since it is registered or titled in his name, legally the property does belong to the trustee. However, a trustee who comingles trust funds acknowledges that the property belongs to the trust. The difficulty lies in determining which property belongs to the trustee and which property belongs to the trust.

 

Problems

 

In the following cases determine whether the trustee has violated the duty to earmark or the duty not to comingle.

 

1. Albert leaves a large number of expensive jewels in trust for the benefit of his children. The trustee lists the jewels on his homeowner’s insurance policy and stores them in his safe deposit box.

 

2. Bernard leaves twenty Arabian horses in trust for the benefit of his children. The trustee places the horses in the stable with his collection of Arabian horses.

 

3. Collin leaves an art collection in trust for the benefit of his children. The trustee registers the art collection in his name.

 

4. David leaves a million dollars in trust for the benefit of his children. The trustee deposits the million dollars in his bank account.

 

5. Ellen leaves a collection of antique cars in trust for the benefit of her children. The trustee records the titles to the cars in his name.

 

In re Dommerich’s Will, 74 N.Y.S.2d 569

 

HECHT, Justice.

 

This is a motion by trustees made pursuant to Article 79 of the Civil Practice Act for a judicial settlement of their account. The only question presented is one raised by the guardian ad litem appointed by the court to protect the interests of the infant beneficiaries. He objects to the trustees’ investment in and holding as part of the trust fund, certain municipal and United States Treasury bonds in bearer form when registered bonds of the same issue are available.

 

It has been stated by leading authorities on trust law that bonds payable to bearer are a proper investment, and need not be registered. In Scott on Trusts, Vol. 2, Par. 179.3, the rule is stated as follows:

 

‘A trustee does not commit a breach of trust by investing trust funds in bonds payable to bearer, instead of registering the bonds in his name as trustee. It is arguable, of course, that a trustee should not invest in bonds payable to bearer and that he should have the bonds registered in his name as trustee for the particular estate for which he holds them, since otherwise they are not earmarked as property of the trust. It would seem, however, that long established practice permits trustees to invest in bonds payable to bearer.’

 

The rule is similarly stated in the Restatement of the Law on Trusts at par. 179, p. 458:

 

‘d. Duty to earmark trust property. Ordinarily it is the duty of the trustee to earmark trust property as trust property. Thus, title to land acquired by the trustee as such should be taken and recorded in the name of the trustee as trustee. Certificates of stock should be issued in the name of the trustee as trustee. If bonds held in trust are registered, they should be registered in the name of the trustee as trustee. If a bond is otherwise a proper trust investment, however, the mere fact that it is payable to bearer does not render it an improper trust investment, unless the terms of the trust prohibit holding securities payable to bearer.’

 

In considering the obligation of a fiduciary to register bonds pursuant to the provisions of Section 231, Surrogate’s Court Act (applicable to testamentary trusts), Mr. Surrogate Foley in Matter of Erlanger’s Estate, 183 Misc. 607, 49 N.Y.S.2d 819, 820-821 said:

 

‘Since the enactment in 1916 of the predecessor section of the Code of Civil Procedure to Section 231, Surrogate’s Court Act, and for a period of twenty-eight years the practical construction accorded to the terms of the section has been that a fiduciary was permitted to invest in and retain bearer bonds.

 

‘By a coincidence, the author of this decision drafted and introduced as a member of the State Senate the legislative measure which became the predecessor section of the Code of Civil Procedure referred to above (Section 2664–a.)

 

‘The pertinent part of Section 231 reads: ‘Every executor, administrator, guardian or testamentary trustee shall keep the funds and property received from the estate of any deceased person separate and distinct from his own personal fund and property. He shall not invest the same or deposit the same with any person, association or corporation doing business under the banking law or other person or institution, in his own name, but all transactions had and done by him shall be in his name as such executor, administrator, guardian or testamentary trustee. Any person violating any of the provisions of this section shall be guilty of a misdemeanor.’

 

‘Under these terms a fiduciary is not compelled to register bonds in the name of the fiduciary of the estate as such. He may retain bearer bonds taken over at the death of the testator and any fiduciary may invest in new bearer bonds.

 

‘The section prohibits him from mingling the bearer bonds with his own property. They must be kept in a safe deposit box or other form of earmarked custody in the name of the fiduciary of the specific estate as such. The fiduciary must purchase such bonds in his name as fiduciary. They cannot be bought in his individual name. Sales likewise are required to be made in the name of the fiduciary as such.

 

‘The construction referred to above, which has been uniformly followed by the Surrogates’ Courts, by trustees and their attorneys and by special guardians, was confirmed by the Legislature in the explanatory note to the amendment of Section 231 made by Chapter 343 of the Laws of 1939. That amendment was recommended by the Executive Committee of the Surrogates’ Association of the State of New York. The explanatory note printed in the legislative bill read: ‘The changes proposed by this amendment relate only to registered securities. It is not intended to compel the fiduciary or the depository to register bearer bonds or to prohibit their retention without registration so long as such bearer bonds are identified, earmarked and segregated as assets of the estate.’’

 

The amendment of Section 231 referred to in the above opinion authorized nominee registration by trustees. Nominee registration was likewise authorized in the case of inter-vivos trusts by Section 25 of the Personal Property Law, added by L. 1944, C. 215, effective March 21, 1944.

 

While there are conflicting decisions at Special Term, New York County, on this subject, it appears to me that the weight of authority permits retention of bearer bonds by trustees. In Cooper v. Illinois Central R.R., First Department 1899, 38 App. Div. 22, 57 N.Y.S. 925, the court affirmed a judgment on the opinion of the referee who held (page 27 of 38 App. Div. page 927 of 57 N.Y.S.):

 

‘There is no rule that I am aware of that requires a trustee, if trust funds are invested in such securities, (bearer bonds) to have the securities registered. The new trustees had the right to have the registration in the name of the deceased executor canceled. They were not bound to have the bonds re-registered in their own names, but might restore them to their original negotiability by having them transferred to bearer.’

 

Matter of Halstead, Surr. Ct. Dutchess County, 44 Misc. 176, 89 N.Y.S. 806, affirmed on the opinion of the Surrogate in 110 App. Div. 909, 95 N.Y.S. 1131, affirmed Court of Appeals in 184 N.Y. 563, 76 N.E. 1096, presents a direct holding on the question. In that case the beneficiaries sought to hold a surviving trustee liable for failing to require that securities belonging to the trust consisting of unregistered railroad and municipal bonds, be payable to or registered in the names of the trustees jointly and for failure to examine the safe deposit box where the securities were kept. The court (page 181 of 44 Misc., page 809 of 89 N.Y.S.) held that it was not negligent of the surviving trustee to permit the bonds to remain negotiable, nor to purchase others in such form, and stated:

 

‘It has been urged that the surviving trustee was negligent in permitting the securities to remain of the same negotiable character as they were at the death of the testator, and in purchasing other securities without requiring that they be made payable to or registered in the names of the trustees jointly. The beneficiaries have failed to show and circumstance which tended to arouse the suspicion of the surviving trustee or themselves, or that there was the slightest reason to believe that the safety of the fund was endangered. No American authority has been cited to sustain this contention, and, in view of the situation outlined in this case, it was not, in my judgment, negligent for Halstead to permit the continuance of the methods which the testator had established and assented to. Wilkinson resided in Poughkeepsie, while Halstead lived in Brooklyn, and, owing to the circumstances referred to and the situation of the trustees, it would have been expensive and unusually cumbersome if the fund was so controlled that every detail of the administration required the joint action of the trustees.’

 

The guardian ad litem argues that the decision of the Court of Appeals in Matter of Union Trust Company (Hoffman Estate) 219 N.Y. 514, 114 N.E. 1057 is authority for his contention. That case involved mortgage participations, a type of security which, by its very nature, must be registered in someone’s name. The court stated (page 521 of 219 N.Y., page 1059 of 114 N.E.):

 

‘It is suggested that corporate or municipal bonds in which a trustee is authorized to invest trust funds may be payable to bearer, and consequently lack any stamp of ownership by the trust. While this is so of securities payable to bearer, the lack of any stamp of ownership on such securities arises from the peculiarity of the investment, and it does not affect the rule in regard to investments that can properly be made distinctive and bear upon their face evidence of their ownership.’

 

However, the question of the right of the trustees to hold bearer bonds was not before the court. It seems to me, in the light of the court’s affirmance in the Halstead case, supra, that it was referring to all bearer bonds, whether capable of registration or not, as a peculiar and distinct type of investment which need not be registered, as contrasted with other types of securities which, by their very nature, have to be put in someone’s name, and consequently must be registered in the name of the trustee as such. Accordingly the objection of the guardian is overruled. Settle order at which time allowances will be fixed.

 

9.3 The Duty Not to Delegate

 

 

A settlor expects the trustee to administer the trust. The settlor selected the trustee because the settlor had confidence in that person’s judgment and ability to carry out the settlor’s instructions. The settlor did not want someone else to manage the trust property. Thus, traditionally, the trustee was obligated not to delegate his discretionary duties to a third party. However, it would be too burdensome to force a trustee to personally perform all acts necessary to administer a trust. Therefore, the trustee may delegate ministerial duties but not delegate discretionary acts. For instance, the trustee of a discretionary support trust cannot let a third party make the decision about if and when to distribute money to the beneficiary. The main duty of a trustee is usually to invest the trust property to ensure that there is enough income to pay to the beneficiary. The law recognizes that the trustee may not have enough expertise to make investment decisions. Therefore, a trustee who delegates his investment duties to a stockbroker does not breach his duty not to delegate. In fact, the duty of prudence requires the trustee to delegate such tasks. However, the trustee is obligated to monitor the activities of the stockbroker. He cannot simply turn over the management of the trust funds to that person. He has a duty to exercise reasonable care in selecting and monitoring the person to whom he delegates his trust duties.

 

9.4 Duty of Prudence

 

 

At common law, when dealing with trust funds, the trustee had a duty to exercise such care and skill as a prudent man would exercise when dealing with his own property. This was similar to the “reasonable man” standard applicable in tort cases. Thus, the trustee’s actions were evaluated based upon the totality of the facts. Currently, the trustee has a duty to invest trust property in a manner consistent to that of a reasonable prudent investor. The duty of prudence includes the duty to be sensitive to risks and return of investments, to diversify and to delegate when appropriate. A portfolio may be undiversified when special circumstances warrant it. The trustee has a duty to diversify unless he decides that because of special circumstances the purposes of the trust would be better served without diversifying. The cases in which courts find special circumstances justifying the failure to diversity are few in number. The special circumstances usually occur when the trust consists of family property. The trustee must monitor the actions of the person to which the trustee delegates investment responsibility. The prudent investor standard is based upon the Uniform Prudent Investor Act and the Restatement (Second) of Trusts. The standard has been codified in the majority of American jurisdictions.

 

Estate of Cooper, 913 P2d 393

 

SWEENEY, Chief Judge.

 

Washington’s prudent investor rule requires a trustee to “exercise the judgment and care under the circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs….” RCW 11.100.020(1). This exercise of judgment requires, among other things, “consideration to the role that the proposed investment or investment course of action plays within the overall portfolio of assets.” RCW 11.100.020(1). In this case of first impression, we are asked to decide whether the prudent investor rule limits the court’s consideration to the overall performance of the trust, or whether, instead, the court may consider the performance of specific assets in the trust. We hold the prudent investor rule focuses on the performance of the trustee, not the results of the trust. The trial court here then appropriately considered individual assets, and groups of assets, in finding that the trustee had improperly weighed trust assets in favor of himself, the income beneficiary. We affirm that portion of the court’s judgment which required the trustee to reimburse the trust corpus for the loss caused by that investment strategy.

 

FACTS

 

The Estate

 

De Anne Cooper died on March 6, 1978. In her will, she provided that her one-half of the community property would be held in trust during her husband Fermore B. Cooper’s lifetime, and that Mr. Cooper and The Old National Bank of Washington (ONB) would serve as co-trustees of the testamentary trust. The trust required payment of income to Mr. Cooper and distribution of the corpus to her children after Mr. Cooper’s death. The nonintervention will named Mr. Cooper personal representative. At the time of her death, Mrs. Cooper had two children, Joyce Johnston and Richard Cooper. Her one-half of the community property was worth about $800,000.

 

Mr. Cooper filed his wife’s will and started a probate. But he took no further steps to conclude the probate until Joyce filed this action. He did not keep a separate estate account and continued to manage all of the former community property as his own.

 

In 1986, Mr. Cooper asked Joyce to approve the substitution of Richard for ONB as co-trustee of the trust. Joyce refused and asked about Mr. Cooper’s management of the estate. At that point, Mr. Cooper funded the trust by depositing in ONB assets valued at approximately $2,000,000. Joyce then petitioned the court to remove Mr. Cooper as personal representative of the estate and trustee of the trust, and for an accounting and a declaration that Mr. Cooper’s second wife had no interest in the trust property. Her petition included a request for attorney fees and costs.

 

The Inventory

 

In March 1989, Mr. Cooper filed an inventory of estate assets. The asset mix set out in that inventory generates the primary dispute in this case. The inventory included (1) an unsecured note from Gifford-Hill, Inc., with a balance of $1,200,000 owing on the date of Mrs. Cooper’s death; (2) partnership interests in Eight-O-One Investment Company and Hillside Investment Company, which owned interests in the Deaconess Medical Building; and (3) substantial holdings in income-producing assets including tax-exempt bonds. The inventory did not include shares in Comtrex, Inc. Mr. Cooper’s son, Richard, was the chief executive officer of Comtrex. After Mrs. Cooper’s death, Mr. Cooper bought shares in the company and also loaned it approximately $824,000, which Comtrex never repaid.

 

Before Mr. Cooper compiled the inventory, he had sold the community’s share of stock in a closely held corporation, Western Frontiers. The corporation owned the North Shore, a hotel and restaurant in Coeur d’Alene. Its shares were valued for estate tax purposes in 1978 at 75¢ a share, for a total value of $21,750. Mr. Cooper sold both his and the estate’s shares in 1983 to Duane Hagadone at a profit of about $1 million. The stock had appreciated largely because of a bidding war between Mr. Hagadone and Robert Templin. Both wanted control of the company. The purchase gave Mr. Hagadone a majority interest. Mr. Cooper reinvested the proceeds in stocks and bonds.

 

An accounting filed along with the inventory calculated the current value of Mrs. Cooper’s estate at $1,279,433. Mr. Cooper’s accountant compiled the accounting from estate tax returns and transaction sheets supplied by Mr. Cooper’s stockbroker. The accounting summarized (1) purchases and sales of assets listed in the 1978 estate tax return, (2) capital gains, and (3) income.

 

On December 26, 1989, the superior court appointed John Cummins “as special master/referee to assist [it] in resolving various disputes that [had] arisen in connection with [the Cooper] estate.” At the time, Mr. Cummins was a vice-president of Seattle-First National Bank and manager of its trust department. The court asked Mr. Cummins to contact the trust department of U.S. Bank (ONB’s successor) to “review what has transpired in connection with the assets” deposited by Mr. Cooper in 1987 to fund the trust. The court also asked Mr. Cooper to forward to Mr. Cummins a copy of the estate accounting. After consulting with Mr. Cummins, the court found that “the accounting as accomplished to date in connection with the trust estate is not in accordance with generally recognized format and principles.” It then instructed Mr. Cooper’s accountant, James McDirmid, “to confer with Mr. Cummins as to what is contemplated to comply with those standards.”

 

Mr. Cooper filed a revised inventory accounting in May 1990 based on Mr. McDirmid’s calculations (McDirmid accounting). It set the 1987 fair market value of the inventoried assets at $1,835,821.50. The value of the assets Mr. Cooper had transferred to fund the trust in 1987 had a value of $1,959,113. Thus, the trust was overfunded by $123,291.50. The accounting also valued the partnership interests in Eight-O-One and Hillside, half of which the estate owned, at $192,000 and $86,000, respectively. These values reflected a 60 percent discount because Mr. Cooper’s interest was a minority interest and therefore not easily marketable.

 

Mr. Cummins concluded the amended accounting revealed “no improprieties.” The court refused Joyce’s request to discover the basis for Mr. Cummins’ opinions. It stated Mr. Cummins was appointed “solely for the purpose of deciding whether or not F. Bert Cooper should be removed as Personal Representative.”

 

The Litigation

 

On December 12, 1990, the court directed the parties to proceed to a hearing on the final report and petition for distribution. At the hearing, the principal issues were the accuracy of the McDirmid accounting and the propriety of Mr. Cooper’s investment strategy. Mr. Cooper and Joyce presented expert opinion testimony in support of their respective positions.

 

The Ruling

 

On December 15, 1992, following the hearing, the court found Mr. Cooper had commingled income from estate assets and proceeds from the sale of estate assets with his own funds. It found the accounting prepared by Mr. Cooper’s accountant adequately traced the estate’s assets. The court further found, based on the McDirmid accounting, that Mr. Cooper “had more than sufficient funds in his own right as his separate property to make gifts and other distributions to and for the benefit of his children.”

 

The court agreed with Mr. Cooper’s valuation of the Eight-O-One and Hillside partnerships. And it held he had acted prudently in negotiating the sale of the Western Frontiers shares. It found that Mr. Cooper had, however, “maintained a policy of investment … which maximized the income of the estate … to the detriment of the growth of the corpus of the estate.” It valued the loss to the remainder interest at $342,493 as of July 1987. It ordered Mr. Cooper to contribute that additional amount, along with $115,840 of expected appreciation from July 1987 to entry of the judgment.

 

The court also found that Mr. Cooper had overfunded the trust by $123,292. It credited that sum against the $458,333 surcharge it had levied against Mr. Cooper to compensate the trust for losses it suffered as a result of his investment strategy ($342,493 + $115,840). It held estate taxes, attorney and accounting fees, and expenses of administration were properly charged by Mr. Cooper to the estate. The court set 1984 as the outside date by which Mr. Cooper should have closed the estate. It then awarded him a fee for serving as personal representative from 1978 through 1984. It also awarded him a fee as co-trustee from July 1987 to the date of the judgment. It ordered the trust divided between Richard and Joyce and discharged Mr. Cooper as the trustee over Joyce’s half because of the “mutual distrust, conflict, and dissension” between Joyce and Mr. Cooper.

 

The court further found that “[a]ll parties to this cause have succeeded to some degree herein and have worked for the benefit of the estate and of their respective clients.” It therefore awarded all parties a portion of their attorney and accountant fees. Joyce received $45,600 in attorney fees and $12,421.67 for her accountant’s fees. The court awarded Mr. Cooper $46,400 of the $115,000 in attorney fees he had requested, and $48,802.50 for his accountant’s fees. It awarded Richard $18,400 in attorney fees and $220.47 in costs. The court approved Joyce’s additional attorney and professional fees of $156,975, but ordered them charged to her share of the trust.

 

DISCUSSION

 

The Appeal

 

Prudent Investor. The question presented is whether the trial court improperly applied the prudent investor rule. Mr. Cooper and Richard argue the court should have evaluated Mr. Cooper’s performance based on the performance of the trust as a whole rather than focusing on specific assets, or groups of assets. They point out that the return on total trust assets exceeded that of the ONB trust department.

 

The trust’s favorable performance, as compared to that of the ONB trust department, was largely due to the gains from Mr. Cooper’s sale of the estate’s Western Frontiers stock. The balance of the trust assets were weighted heavily toward current income rather than capital appreciation. Common stocks represented 13 percent of the trust’s marketable securities; bonds and bond equivalents represented 87 percent. The estate’s gain attributable to increases in the value of the securities was only $226,313. This figure represented a 22.23 percent return on those investments, or a 2.15 percent increase per year between 1978 and 1987. Inflation averaged 6 percent a year during that same period. The purchasing power of these assets decreased then just under 4 percent a year.

 

Overall trust performance is a factor in evaluating the performance of the trustee. But it is not by itself controlling. “The court’s focus in applying the Prudent Investor standard is conduct, not the end result.” J. Alan Nelson, The Prudent Person Rule: A Shield for the Professional Trusts, 45 Baylor L. Rev. 933, 939 (1993). The American version of the prudent investor rule began with the Harvard College case:

 

All that can be required of a trustee to invest, is, that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.

 

Nelson, 45 Baylor L. Rev. at 939 (quoting Harvard College v. Amory, 26 Mass. (9 Pick), 446, 460-61 (1830)). In Harvard College, the court recognized that trust assets could never be fully protected from the uncertainties of the market place; thus, the prudent investor standard was necessarily flexible. Nelson, 45 Baylor L. Rev. at 938.

 

In the recent New York case of In re Lincoln First Bank, N.A., 165 Misc.2d 743, 630 N.Y.S.2d 472 (Sur.Ct. 1995), the court interpreted its own version of the prudent investor rule and made two observations which are helpful here. First, “whether an investment is prudent or not is a question of fact.” Lincoln First Bank, N.A., 165 630 N.Y.S.2d at 474 (citing In re Clarke’s Estate, 12 N.Y.2d 183, 188 N.E.2d 128, 237 N.Y.S.2d 694 (1962); In re Yarm, 119 A.D.2d 754, 501 N.Y.S.2d 173 (1986)). Second, the prudent investor standard requires “that the fiduciary maintain a balance between the rights of income beneficiaries with those of the remainderman.” Lincoln First Bank, 630 N.Y.S.2d at 474. This state’s version of the rule also requires that the trustee consider income as well as the safety of the capital and the requirements of the beneficiaries. RCW 11.100.020(2). Clearly, the focus is on the trustee’s performance, not simply on the net gain or loss to the trust corpus. Nelson, 45 Baylor L. Rev. at 939.

 

The trial court here properly applied the prudent investor standard, as set forth above, and its findings of fact on that issue are supported by substantial evidence. Cowiche Canyon Conservancy v. Bosley, 118 Wash.2d 801, 819, 828 P.2d 549 (1992).

 

Both parties rely on Baker Boyer Nat’l Bank v. Garver, 43 Wash. App. 673, 719 P.2d 583, review denied, 106 Wash.2d 1017 (1986). There, the trust beneficiaries sued for damages resulting from imprudent investments made by Baker Boyer, the trustee bank. They argued the bank had breached a duty to diversify when it invested primarily in fixed-income securities. The bank responded it had no duty to diversify under the prudent investor rule, as codified in former RCW 30.24.020 (now RCW 11.100.020.). Even if such a duty existed, the bank contended diversification between fixed-income securities and equity investment in real property satisfied the duty under a “total asset” management approach.

 

The court agreed with the beneficiaries that the prudent investor standard includes the duty to diversify trust assets. But it found it unnecessary to decide whether former RCW 30.24.020 incorporated the “total asset” approach. The evidence supported the trial court’s finding “the Bank had not weighed the investment in securities against the investment in the farmland for purposes of diversification.” Baker Boyer, 43 Wash. App. 673, 719 P.2d 583 (emphasis added).

 

Likewise, Mr. Cooper did not weigh his investment in income-producing securities against his investment in Western Frontiers. The overall trust performance was boosted dramatically by the sale of the Western Frontiers stock in 1983. But Mr. Cooper’s investment strategy could not have anticipated the gain from the sale of the stock before it occurred. By 1983, when the stock was sold, he had been administering the estate for five years. Furthermore, after the sale, he invested the estate assets almost exclusively in marketable securities, 87 percent in bonds, favoring again the income beneficiary-him. There was no other asset or group of assets which Mr. Cooper could have balanced against this investment.

 

SUMMARY

 

In Mr. Cooper’s appeal, we affirm the trial court’s finding that his management of the estate’s marketable securities breached his duty to act as a prudent investor

 

In re Matter of the Stuart Cochran Irrevocable Trust, 901 N.E.2d 1128

 

BAKER, Chief Judge.

 

Appellants-petitioners Chanell and Micaela Cochran (the Beneficiaries) appeal the trial court’s order entering final judgment in favor of appellee-respondent KeyBank, N.A. (KeyBank), on the Beneficiaries’ petition seeking an accounting and alleging that KeyBank had breached its obligations as Trustee. The Beneficiaries argue that the trial court erroneously concluded that KeyBank did not violate the prudent investor rule and or breach its duties as trustee. Finding no error, we affirm.

 

FACTS

 

On December 28, 1987, Stuart Cochran created an irrevocable trust (the Trust) and named his two daughters, Chanell and Micaela, as the Beneficiaries. At that time, the Beneficiaries were two and four years old, respectively. In 1989, Stuart’s wife, now Mary Kay Vance, filed for divorce and was awarded full custody of the children.

 

Stuart funded the Trust with life insurance policies and was assisted by an insurance advisor, Art Roberson. Elkhart National Bank was the initial trustee; subsequently, Pinnacle Bank (Pinnacle) was named as a successor trustee. Pinnacle served as the trustee until 1999. In January 1999, Pinnacle called Vance and informed her that it no longer wished to serve as trustee because of Stuart’s insistence on having third parties—specifically, himself, his sister, and Roberson—involved in the trustee’s decisionmaking process. Pursuant to the terms of the Trust, Vance was required to appoint a successor trustee. Vance retained an attorney, and in January 1999, they met with a KeyBank representative to discuss moving the Trust to KeyBank. On February 3, 1999, Vance appointed KeyBank as successor trustee.

 

The 1999 Exchange and the VUL Policies

 

At approximately the same time she received notice that Pinnacle intended to resign as trustee, Vance received a call from Roberson, who provided new recommendations regarding the insurance policies held by the Trust. Specifically, Roberson recommended that the three life insurance policies and one annuity then held by the Trust be replaced with two new life insurance policies—a ManuLife Variable Universal Life policy and an American General Variable Universal Life policy (collectively, the VUL policies).

 

At the time KeyBank assumed the duties of successor trustee, the Trust’s assets consisted of three life insurance policies and one annuity and with a collective net death benefit of $4,753,539.00. As noted above, however, Roberson had recommended an exchange of policies, replacing these policies with the two VUL policies. When KeyBank assumed its duties, the underwriting for the exchange of policies had been approved and Stuart had already submitted to the physical exams. In February and March 1999, KeyBank approved the transaction and the exchange of policies took place (the 1999 Exchange), with a new total death benefit of $8 million.

 

Following September 11, 2001, the stock markets took a dramatic decline. The downward trend in the markets had an adverse effect on the value of the mutual fund investments contained in the VUL policies. In fact, in 2001, the policies lost money, meaning that the cost of insurance and the carriers’ administrative charges were greater than the income generated by the investments; in 2002, the losses were even greater.

 

The Oswald Review

 

In the spring of 2003, KeyBank retained Oswald & Company (Oswald), an independent outside insurance consultant, to audit the VUL policies. At that time, Stuart was fifty-two years old and the VUL policies had a combined death benefit of $8,007,709.

 

Therefore, in the trial court’s words, “[t]he Oswald review indicated that it was likely that the two existing policies would lapse before [Stuart] reached his life expectancy of 88 years.” Appellants’ App. p. 16. Moreover, because Stuart’s “financial fortune had also taken a negative turn by this point in time, he had no financial wherewithal to supplement the trust with additional resources or through the purchase of additional policies of life insurance.” Id. at 17.

 

As Oswald conducted its review of the VUL policies, Roberson completed his own review of alternative policies. Roberson eventually proposed to KeyBank that a John Hancock policy be purchased to replace the two VUL policies. The John Hancock policy offered a lump sum death benefit of $2,787,624 that was guaranteed to age 100.

 

KeyBank requested Oswald to review the John Hancock policy. Representatives of those companies exchanged some emails, in which an Oswald employee noted that the John Hancock policy “drastically reduces” the expected death benefit, asking, “[i]s this … what [your] client wants to do?” Id. at 318. The KeyBank representative replied in the affirmative, stating that “[i]t is [Stuart’s] intention to reduce his life insurance coverage to the amount seen on the John Hancock illustrations.” Id. at 317. Oswald reviewed the John Hancock policy and compared it to the two VUL policies. Id. at 334–35. In an email, an Oswald employee summarized its conclusion:

 

We’re sure the guarantees in this John Hancock product have a lot of appeal to [Stuart] given the fact of his substantial investment losses in his current [VUL] policies.

 

Given the facts that he is moving to a fixed product with the death benefit guaranteed to age 100 and $0 future outlay, our recommendation would be to move forward with the proposed John Hancock coverage if the client is comfortable with the reduction in death benefit.

 

Id. at 317.

 

After reviewing Oswald’s analyses of the respective policies and considering the recommendations contained in the reports, in June 2003, KeyBank decided to retire the VUL policies and purchase the John Hancock policy in their stead (the 2003 Exchange). After Stuart underwent a medical exam, John Hancock underwriters rated him as a preferred risk rather than a super preferred. That classification resulted in the guaranteed benefit being $2,536,000 rather than $2,787,624. The Oswald employee who had performed the analysis testified that this change would not have altered Oswald’s ultimate recommendation. In January 2004, Stuart died unexpectedly at the age of 53. The Trust received $2,536,000 in life insurance proceeds for the Beneficiaries’ benefit.

 

On April 2, 2004, the Beneficiaries filed a petition to docket the Trust and to require KeyBank to account. On March 7, 2005, KeyBank filed a petition to reform the trust and for approval of its accounting. The Beneficiaries filed a counterclaim and claim for surcharge, arguing, among other things, that KeyBank had breached its fiduciary duties as Trustee. A bench trial was held on August 28–30, 2007, on the issues raised in the Beneficiaries’ counterclaim and claim for surcharge, with all other issues being reserved for a later time. On May 29, 2008, the trial court entered findings of fact and conclusions of law, ruling in KeyBank’s favor. Among other things, the trial court concluded as follows:

 

CONCLUSIONS OF LAW AND ANALYSIS

 

* * *

 

(20) The ultimate question facing this Court is whether the actions of the Trustee, KeyBank, were consistent with the Settlor’s intent as expressed in the Trust document and met its fiduciary duties to the Beneficiaries. In essence, based on the circumstances facing the Trust in 2003, was it prudent for the Trustee to move the trust assets from insurance policies with significant risk and likelihood of ultimate lapse into an insurance policy with a smaller but guaranteed death benefit? This Court concludes that this conduct was consistent with the standard established by the prudent investor rule.

 

(21) KeyBank and its representative acted in good faith to protect the corpus of the Trust based on the downturn in the stock markets and the prospect that the existing policies would lapse before the expected life expectancy of the Settlor.

 

(22) In hindsight, due to the unexpected demise of the Settlor at age 53, KeyBank’s decision resulted in a significant reduction in the death benefit paid to the beneficiaries. However, from the perspective of the Trustee at the time of its decision, it was prudent to protect the Trust from the vagaries of the stock market and from predicted lapse of the existing policies. It might also have been prudent to take a “wait and see” approach, however, the prudent investor standard gives broad latitude to the Trustee in making these types of decisions.

 

(23) Had the insurance policies lapsed, the Beneficiaries would have received no distribution from the Trust. Certainly, that outcome was not within the intent of the Settlor at the time he established this Trust.

 

(24) Frankly, financial trends outside of the control of the Trustee or the Beneficiaries were the direct and proximate cause of the problem facing the Trust in 2003. While it would have been preferable for the Trustee to provide regular accountings to the Beneficiaries, the receipt of timely financial reports by the Beneficiaries would not have changed the negative financial condition of the Trust.

 

(25) The Beneficiaries want this Court to focus on the defects in KeyBank’s decisionmaking process, and while the Court recognizes that this process was certainly less than perfect with respect to the Cochran Trust, the Court concludes that it would need to engage in sweeping conjecture, which is not supported by the evidence, to find that damages resulted to the Beneficiaries based on the circumstances presented here.

 

(26) Accordingly, this Court concludes that KeyBank did not breach its fiduciary responsibility to the Trust or the Beneficiaries, and the lack of financial reporting to the Beneficiaries and the decision to the [sic] reinvest the corpus of the Trust in a guaranteed insurance policy was not the proximate cause of damages to the Beneficiaries.

 

(27) In conclusion, by insuring [sic] that the Trust was funded by a guaranteed death benefit in the sum of $2,536,000.00, KeyBank acted in good faith to protect the interests of the Beneficiaries and to comply with the directives of the Settlor as contained in the Trust document.

 

Id. at 22–24. The Beneficiaries now appeal.

 

DISCUSSION AND DECISION

 

I. Standard of Review

 

The trial court entered findings of fact and conclusions of law pursuant to Indiana Trial Rule 52(A). We may not set aside the findings or judgment unless they are clearly erroneous. Menard Inc. v. Dage-MTI. Inc., 726 N.E.2d 1206, 1210 (Ind. 2000). First, we consider whether the evidence supports the factual findings. Id. Second, we consider whether the findings support the judgment. Id. “Findings are clearly erroneous only when the record contains no facts to support them either directly or by inference.” Quillen v. Quillen, 671 N.E.2d 98, 102 (Ind. 1996). A judgment is clearly erroneous if it relies on an incorrect legal standard. Menard, 726 N.E.2d at 1210.

 

In conducting our review, we give due regard to the trial court’s ability to assess the credibility of witnesses. Id. While we defer substantially to findings of fact, we do not do so to conclusions of law. Id. We do not reweigh the evidence; rather, we consider the evidence most favorable to the judgment with all reasonable inferences drawn in favor of the judgment. Yoon v. Yoon, 711 N.E.2d 1265, 1268 (Ind. 1999).

 

II. The Prudent Investor Act

 

The Beneficiaries first argue that the trial court erroneously concluded that KeyBank’s actions leading up to the 2003 Exchange did not violate the Indiana Uniform Prudent Investor Act (PIA). Ind. Code § 30-4-3.5-1 et. seq. In relevant part, the prudent investor rule, as set forth in the PIA, provides as follows:

 

(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.

 

(b) A trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.

 

(c) Among circumstances that a trustee shall consider in investing and managing trust assets are those of the following that are relevant to the trust or its beneficiaries: (1) General economic conditions, (2) The possible effect of inflation or deflation, ***(5) The expected total return from income and the appreciation of capital, (6) Other resources of the beneficiaries, (7) Needs for liquidity, regularity of income, and preservation or appreciation of capital.

 

* * *

 

(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.

 

* * *

 

(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee’s representation that the trustee has special skills or expertise, has a duty to use the special skills or expertise.

 

I.C. § 30-4-3.5-2.

 

A. Delegation

 

The Beneficiaries first argue that KeyBank violated the PIA by imprudently and improperly delegating certain decisionmaking functions to Roberson and Stuart. Initially, we observe that the PIA contemplates the delegation of functions by a trustee under certain circumstances:

 

A trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in: (1) selecting an agent; (2) establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and (3) reviewing the agent’s actions periodically in order to monitor the agent’s performance and compliance with the terms of the delegation.

 

I.C. § 30-4-3.5-9(a).

 

Here, it is evident that Roberson chose to monitor the Trust throughout its existence. He helped to create it and, in 1999, recommended an exchange of policies. Then, in 2003, KeyBank began its own review of the viability of the current structure of the Trust, engaging Oswald to analyze the current VUL policies. Simultaneously—and of his own volition, apparently —Roberson conducted his own review. Roberson eventually proposed to KeyBank that a John Hancock policy be purchased to replace the two VUL policies.

 

After Roberson made his proposal, KeyBank again hired Oswald to conduct an independent review of the John Hancock policy. The fact that Roberson submitted the policy for review does not constitute a delegation of KeyBank’s decisionmaking duties. Oswald was an outside, independent entity with no policy to sell or any other financial stake in the outcome. Under these circumstances, we do not find that KeyBank delegated any investment or other duties to Roberson. Although the Beneficiaries direct our attention to evidence in the record supporting their contention that there was, in fact, a delegation, this is merely a request that we reweigh the evidence—a request we decline.

 

B. Oswald’s Recommendations

 

The Beneficiaries next argue that KeyBank violated the PIA by disregarding Oswald’s recommendations. As noted above, KeyBank first asked Oswald to review the existing VUL policies. After comparing the policies’ respective hypothetical performances given hypothetical interest rates, Oswald rated both policies as a Category Three on a scale from one to five, noting that “additional future premiums may be required” and that the policies “should be audited every two to three years or more often” under certain circumstances. Appellants’ App. p. 312–13, 315. KeyBank then asked Oswald to review the proposed John Hancock policy. Oswald found that no further premiums would be required to maintain that policy until Stuart reached the age of 100. Ultimately, Oswald recommended the purchase of the John Hancock policy, rating the policy as a Category One on a scale from one to five, with one being the best. No further audits would be necessary. Id. at 334–35.

 

Having reviewed these reports, it is evident that Oswald found both options—the existing VUL policies and the John Hancock policy—to be palatable. Each had their own sets of pros and cons. The existing VUL policies may have lapsed before Stuart reached the age of 60 and would likely have required additional premiums to finance—money that Stuart no longer had. The John Hancock policy, on the other hand, offered a significantly reduced death benefit but was guaranteed to remain in force until Stuart reached the age of 100 and would require no additional financing. Oswald found the John Hancock policy to warrant the highest rating and concluded that no further audits would be necessary. Under these circumstances, we cannot say that KeyBank’s decision to exchange the VUL policies for the John Hancock policy parted ways from Oswald’s advice and recommendations. KeyBank merely chose between two relatively acceptable options—a decision it was entitled to make as trustee. We do not find that it acted imprudently on this basis.

 

C. Investigation of Alternatives

 

The Beneficiaries next fault KeyBank for failing to investigate alternatives aside from retaining the existing VUL policies or exchanging them for the John Hancock policy. It is very likely that, no matter what the circumstances, a trustee could always do more. Investigate further, engage in more brainstorming, expand the scope of its queries, etc. It is difficult, if not impossible, to draw a bright line demarcating the point at which a trustee has done enough from the point at which it must do more. Here, KeyBank was concerned about the state of the economy, the stock market, and Stuart’s limited financial resources. It examined the viability of the existing policies and investigated at least one other option. Of course it could have done more, but nothing in the record leads us to second-guess the trial court’s conclusion that, while KeyBank’s “process was certainly less than perfect,” it was adequate. Appellants’ App. p. 22–24. Thus, it was not clearly erroneous for the trial court to conclude that KeyBank did not act imprudently for this reason.

 

The Beneficiaries also argue briefly that KeyBank’s conduct surrounding the 1999 Exchange violated the PIA. As noted above, at the time KeyBank assumed the duties of successor trustee, the underwriting for the exchange of policies had been approved and Stuart had already submitted to the physical exams. Indeed, the exchange had been contemplated since the summer of 1998. Furthermore, the transaction nearly doubled the total death benefit available under the trust. At trial, the Beneficiaries’ experts testified that they had originally committed a calculation error with respect to the 1999 Exchange and, once the error was corrected, they believed that the risk factors associated with the 1999 Exchange were within the range of defensible possibilities. Appellee’s App. p. 412–17. Under these circumstances, there is no evidence supporting the Beneficiaries’ argument that KeyBank violated the PIA with its conduct in 1999.

 

D. No Hindsight

 

The PIA cautions that “[c]ompliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight.” I.C. § 30-4-3.5-8. Here, at the time KeyBank was evaluating its options before the 2003 Exchange, it was working with the following facts and circumstances: (1) a rapidly declining stock market; (2) the most recent two years, in which the Trust had lost progressively more money, with every reason to believe that further erosion would occur with every day it held the VUL policies; (3) a grantor in his early 50s with a life expectancy of 88 years; (4) a grantor who had lost a great deal of money because of the economic decline and, consequently, had no further funds to invest in the trust; and (5) a trust that consisted of two life insurance policies that an independent expert estimated could lapse within approximately five years if no further funds were invested.

 

Under these circumstances, KeyBank’s decision to exchange the VUL policies for the John Hancock policy was eminently prudent, reduction in death benefit notwithstanding. That a “wait and see” approach may also have been a prudent course of action does not alter the propriety of the exchange. We now know, in hindsight, that the economy improved and Stuart died unexpectedly less than a year after the 2003 Exchange took place—given those facts, of course, we understand that the Beneficiaries wish that KeyBank had made a different decision. But keeping in mind only the facts and circumstances at the time KeyBank made its decision, we cannot say that its decision violated the PIA.

 

III. Trustee’s Duties

 

The Beneficiaries next argue that even if KeyBank did not violate the PIA, it breached a number of its duties to them. A trust is a fiduciary relationship between a person who, as trustee, holds title to property and another person for whom, as beneficiary, the title is held. I.C. § 30-4-1-1(a). A “breach of trust” is a violation by the trustee of any duty that is owed to the beneficiary, with the duties being established by statute and by the terms of the trust. Davis v. Davis, 889 N.E.2d 374, 380 (Ind. Ct.App. 2008). In relevant part, Indiana Code section 30-4-3-6 provides as follows:

 

(a) The trustee has a duty to administer a trust according to its terms.

 

(b) Unless the terms of the trust provide otherwise, the trustee also has a duty to do the following: (1) Administer the trust in a manner consistent with [the PIA]. * * * (3) Preserve the trust property. (4) Make the trust property productive for both the income and remainder beneficiary. As used in this subdivision, “productive” includes the production of income or investment for potential appreciation. * * * (7) Upon reasonable request, give the beneficiary complete and accurate information concerning any matter related to the administration of the trust and permit the beneficiary or the beneficiary’s agent to inspect the trust property, the trustee’s accounts, and any other documents concerning the administration of the trust.* * * (10) Supervise any person to whom authority has been delegated….

 

Furthermore, a trustee owes its beneficiaries a duty of accounting, which requires the trustee to deliver an annual written statement of the accounts to each income beneficiary or her personal representative. I.C. § 30-4-5-12(a). Finally, it is well established that a trustee “shall invest and manage the trust assets solely in the interest of the beneficiaries.” I.C. § 30-3-5-5.

 

A. Relationship to Beneficiaries

 

1. Annual Reports

 

The record reveals that when the Beneficiaries were minors—as they were for most of the relevant period of time—KeyBank sent its annual reports to Stuart, their father. This was not a perfect solution, inasmuch as it was Vance, their mother, who was the custodial parent. But it establishes KeyBank’s good faith, at the least. Cf. Davis, 889 N.E.2d at 383-84 (finding a breach of trust where trustee willfully withheld information from the beneficiaries and engaged in self-dealing).

 

At some point before the 2003 Exchange, one of the Beneficiaries turned eighteen. KeyBank inadvertently failed to send her a copy of the annual report at that time. Following her birthday, she requested documents from KeyBank. A KeyBank representative contacted the Beneficiary and Vance and indicated that the documents were ready at a local KeyBank office to be picked up. Yet again, therefore, we cannot conclude that there is any evidence that KeyBank willfully withheld information from the Beneficiary.

 

The Beneficiaries also argue that KeyBank breached its duties by failing to provide sufficient information regarding its plan to carry out the 2003 Exchange. We cannot agree, inasmuch as the Trust itself gave the trustee the power to surrender or convert the policies without the consent or approval of anyone: “The Trustee shall have all of the rights of the owner of such policies and, without the consent or approval of the Grantor or any other person, may sell, assign or hypothecate such policies and may exercise any option or privilege granted by such policies, including … the right to … surrender or convert such policies….” Appellants’ App. p. 455 (emphasis added). There was no requirement, therefore, that KeyBank notify the Beneficiaries of the impending exchange, inasmuch as neither their consent nor approval were required to carry out the transaction.

 

Even if we were to find that KeyBank’s actions herein constituted a breach of its duty to the Beneficiaries, we cannot countenance the Beneficiaries’ argument that the lack of receipt of an annual report or failure to provide information about the exchange, without more, supports an award of compensatory damages. For damages to be warranted, we can only conclude that causation must be established. The trial court found that “the receipt of timely financial reports by the Beneficiaries would not have changed the negative financial condition of the trust” and that the “lack of financial reporting to the Beneficiaries was not the proximate cause of damages to the Beneficiaries.” Appellants’ App. p. 22–24. There is certainly evidence in the record supporting those findings. We agree with the trial court that “financial trends outside of the control of the Trustee or the Beneficiaries were the direct and proximate cause of the problem facing the Trust in 2003,” id., and would add that another contributing problem beyond everyone’s control was Stuart’s tragic, untimely death. We simply cannot conclude that KeyBank’s shortcomings vis a vis the provision of annual reports and other information to the Beneficiaries was a proximate cause of any damages to the Beneficiaries.

 

2. Duty of Loyalty

 

Next, the Beneficiaries argue that KeyBank somehow breached its duty of loyalty to them. The only evidence they point to in support of this argument is the fact that KeyBank had various contacts and communications with Stuart between 1999 and 2003. According to the Beneficiaries, this evidence supports an inference that KeyBank was loyal to Stuart rather than to the Beneficiaries, as required by law. We cannot agree. A trustee must, as a practical matter, have contacts with the settlor. Appellee’s App. p. 474. For example, if changes are going to be made to an insurance policy, those changes generally require that the settlor submit to a physical exam; therefore, such a change cannot be effectuated without communication between a trustee and settler. Id. Nothing in the law prohibits contact between a trustee and settlor, nor should it. Here, nothing in the record leads us to conclude that KeyBank breached its duty of loyalty to the Beneficiaries.

 

B. Delegation

 

The Beneficiaries also argue that KeyBank breached its duties to them by delegating certain decisionmaking functions to Roberson without adequate oversight. As discussed above, however, the record supports a conclusion that, in fact, no such delegation occurred. Furthermore, KeyBank engaged its own independent expert to evaluate the VUL policies and the John Hancock policy that was suggested by Roberson. Under these circumstances, we do not find that KeyBank breached its duties to the Beneficiaries in this regard.

 

C. Grantor’s Intent

 

Finally, the Beneficiaries argue that the trial court erroneously concluded that the 2003 Exchange was consistent with Stuart’s intent. The primary goal in construing a trust document is to ascertain and effectuate the intent of the settlor, which may be determined from the language of the trust instrument and matters surrounding the formation of the trust. Malachouski v. Bank One, 590 N.E.2d 559, 565-66 (Ind. 1992). The Beneficiaries suggest that the trial court was improperly considering Stuart’s acts or requests made after the trust was executed in reaching that conclusion. We cannot agree, however, inasmuch as the trial court explicitly concluded as follows: “Had the insurance policies lapsed, the Beneficiaries would have received no distribution from the Trust. Certainly that outcome was not within the intent of the Settlor at the time he established the Trust.” Appellants’ App. p. 22–24 (emphasis added). Nothing in the record suggests that the trial court was clearly erroneous in reaching that conclusion, and we decline to disturb its ruling for this reason.

 

CONCLUSION

 

In sum, we find that the trial court did not erroneously conclude that, while KeyBank’s decisionmaking process and communication with the Beneficiaries was not perfect, it was sufficient. Although it is tempting to analyze these cases with the benefit of hindsight, we are not permitted to do so, nor should we. KeyBank chose between two viable, prudent options, and given the facts and circumstances it was faced with at that time, we do not find that its actions were imprudent, a breach of any relevant duties, or a cause of any damages to the Beneficiaries.

 

The judgment of the trial court is affirmed.

 

Class Discussion Tool

 

Glover Washington placed his entire estate in trust for the benefit of his seventy-five year old wife, Sarah for life, with the remainder to be distributed to his five children. The primary corpus of the trust consisted of a stock portfolio. The portfolio contained the following: 60% Washington Computer stock; 10% Apple Computer stock; 5% Dell Computer stock; and 5% Microsoft stock. The 60% Washington Computer stock represented a 58% ownership interest in the company. The Washington Computer Company had been in the Washington family for over fifty years and Glover made it clear that he wanted his descendants to always have the controlling interest in the company. In 2000, Glover died and City Bank assumed its role as trustee. At that time, Washington Computer stock was selling for $123 per share. In 2004, the Washington Computer stock was selling for $80 per share. The stock continued to sell as follows: 2005 ($72); 2006 ($108); 2007 ($94). When Sarah died in 2008, the Washington Computer stock was selling for $85 per share. At no time did City Bank discuss selling the trust’s shares of Washington Computer stock. In 2009, when City Bank made its accounting to Glover’s five children and prepared to distribute the remaining trust funds, the children objected to the accounting. The children sued City Bank for breaching the duty of prudence. What result?

Leave a Reply

Your email address will not be published. Required fields are marked *