Statutory and case law requires a trustee to diversify trust assets. Under the Prudent Investor Act, N.J.S.A. 3B:20-11.1 [to] -11.12, “[a] fiduciary shall diversify the investments of the trust unless the fiduciary reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.” N.J.S.A. 3B:20-11.4. A trustee is under a duty to the beneficiary to exercise prudence in diversifying the investments so as to minimize the risk of large losses.
Under NJ trust law, a trustee should not invest a disproportionately large part of the trust estate in a particular security or type of security.”
One must examine the provisions of the Will which create the trust to evaluate a trustee’s conduct with respect to prospective trust assets.
Does the trust contain ambiguous commands (i.e., does it identify a date certain upon which the Trust terminates, does it provide any deadline by which distributions must be made, does it limit the trustee’s powers while he/she is accomplishing the specified duties? Absent some manifest expression of the settlor’s intent, the trustee’s conduct is limited by only the underlying law of NJ.
This underlying law grants a trustee wide discretion to carry out the administration of a trust.
To discuss your NJ trust and estate administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Estate Administration Attorney