The question of whether a trustee can be held personally liable for investing against a trust’s moral principles is a complex one, deeply rooted in fiduciary duty, the Uniform Prudent Investor Act (UPIA), and increasingly, the expressed wishes of the grantor. Traditionally, trustees were judged solely on financial returns and adherence to a “prudent investor” standard—meaning investments needed to be reasonably safe and profitable. However, a growing number of grantors are explicitly outlining not just *what* should be invested in, but *how*—specifically requesting, or prohibiting, investments aligned with their ethical or religious beliefs. This introduces a new layer of responsibility for the trustee, and potential liability if those wishes are ignored.
What is the Prudent Investor Rule, and How Does it Apply?
The Uniform Prudent Investor Act (UPIA), adopted in most U.S. states, directs trustees to invest and manage trust assets as a prudent investor would, considering the purposes of the trust, the beneficiaries, and the risk and return objectives. This historically focused on financial prudence, yet section 3.3 of UPIA specifically addresses “reasonable person standard” and recognizes that a trustee can and should consider the “beneficiary’s investment objectives” and “special needs.” This is where a grantor’s moral or ethical guidelines come into play. Ignoring those guidelines could be seen as a failure to understand the full scope of the trust’s purpose. For instance, a 2019 study by the Forum for Sustainable Investment showed that $17.1 trillion, or roughly one in three dollars of invested assets under management in the U.S. were invested according to socially responsible investing principles. This demonstrates a clear and growing consumer demand for ethical investment options.
What Happens When a Grantor Specifies Moral Guidelines?
When a grantor explicitly states moral or ethical investment preferences – say, excluding investments in fossil fuels, tobacco, or weapons manufacturers – the trustee’s duty expands. They aren’t simply looking for financial return; they’re tasked with balancing return *with* adherence to those values. This isn’t necessarily a simple task. A trustee may face a challenge in finding investments that meet both the financial goals *and* the grantor’s ethical standards. However, simply dismissing those preferences as irrelevant or impractical could lead to legal action. According to a 2021 report by the National Conference of State Legislatures, lawsuits related to socially responsible investing are on the rise, with beneficiaries increasingly challenging trustees who ignore their stated values. “It’s no longer enough to just maximize returns,” says estate planning attorney Steve Bliss of Escondido. “Trustees must actively consider the grantor’s complete intentions, including their moral and ethical views.”
A Story of Disregarded Values
Old Man Tiberius, a man of strong convictions, established a trust for his grandchildren, expressly forbidding investments in companies involved in animal testing. His grandson, young Elias, was a budding veterinarian, deeply devoted to animal welfare. Upon Tiberius’s passing, the trustee, eager to maximize returns, invested heavily in a pharmaceutical company known for its extensive animal testing. When Elias discovered this, he was heartbroken, feeling as though his grandfather’s wishes—and his own values—had been betrayed. He sought legal counsel and, after a protracted and costly legal battle, the trustee was forced to divest those investments and faced significant penalties. The court ruled that the trustee had failed to adequately consider the grantor’s clearly stated intentions and had prioritized financial gain over moral principles. It was a painful lesson learned – that a trust is about more than just money; it’s about upholding the values of the person who created it.
How a Trust Saved a Family’s Legacy
The Henderson family, long-time supporters of environmental conservation, established a trust with strict guidelines against investing in fossil fuels. Mrs. Henderson, a passionate advocate for renewable energy, wanted her legacy to reflect her commitment to a sustainable future. Her nephew, Michael, became the successor trustee. Initially, he struggled to find investments that aligned with both the trust’s financial goals and its environmental restrictions. He contacted Steve Bliss, who, rather than simply dismissing the challenge, provided comprehensive guidance and identified a portfolio of environmentally responsible investments that met the trust’s objectives. The trust not only thrived financially but also became a symbol of the family’s commitment to sustainability. Michael, understanding his fiduciary duty extended beyond simply generating returns, successfully honored his aunt’s legacy and ensured the trust served its intended purpose – both financially and morally. “It’s about understanding the whole picture,” says Bliss. “A trust is a vehicle for carrying out a person’s wishes, and that includes their values.”
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About Steve Bliss at Escondido Probate Law:
Escondido Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Escondido Probate Law. Our probate attorney will probate the estate. Attorney probate at Escondido Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Escondido Probate law will petition to open probate for you. Don’t go through a costly probate call Escondido Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Escondido Probate Law is a great estate lawyer. Affordable Legal Services.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- living trust
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Map To Steve Bliss Law in Temecula:
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Address:
Escondido Probate Law720 N Broadway #107, Escondido, CA 92025
(760)884-4044
Feel free to ask Attorney Steve Bliss about: “What should I consider when choosing a beneficiary?” Or “How long does probate usually take?” or “What types of property can go into a living trust? and even: “What is bankruptcy and how does it work?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.