The fact that trust investments have declined in value probably is not, by itself, a breach of the trustee’s duty.  The trust instrument may include an investment standard which the trustee is required to meet.  If the trustee's performance falls short of that standard, you may be able to sue the trustee for damages, seek his removal or pursue another remedy.  If the trust instrument contains no contrary investment standard, then the trustee has a duty to comply with the prudent investor rule, which requires the trustee to consider many factors in deciding how to invest the trust assets. Under the prudent investor rule, the possible liability of the trustee is based on the performance of the entire portfolio, not just a single investment. If the trustee fails to meet the prudent investor rule standard, the beneficiaries of the trust may have a cause of action against the trustee for damages to the trust.

Last updated on January 6, 2011 by Glenn Karisch