By John A. Hartog
is part of our series of posts written by John A. Hartog of John A. Hartog,
Inc. in Orinda, Calif., and Shirley L. Kovar of Henderson Caverly Pum Charney
LLP, in San Diego, Calif., co-authors of the LexisNexis® Matthew Bender®
Practice Guide titled California Trust Litigation (March 2011). In this post, Hartog discusses how the
principles under trust law are changing. Hartog and Kovar will be appearing at
seminars and a webinar in the coming weeks.
For more information, please go to: www.ocbar.org
One of the pockets of this discipline that is
evolving very rapidly has to do with the investment responsibilities of
fiduciaries of trustees. We had an
evolving law of duties of trustees, of what they could invest in, starting in
1817, all the way up through let's say the 1950s. And then the modern
discipline of financial investment and economic analysis took off, and it
became apparent that the restrictions on trustees was causing a drag on the
investment return of trust portfolios, which were in turn causing disgruntled
beneficiaries, and then that was causing litigation.
The law evolved into a new uniform statute,
what's called the Uniform Prudent Investor Act, which now codifies what
financial analysts call the modern portfolio theory. And so that's why trust
litigation is in flux, because now cases are being defined in terms of whether
the trustees are investing under the modern portfolio theory, and they're failing
to diversify, and that's a grounds for suing them.
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Practice Guide: California Trust Litigation
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Practice Guide: California Trust Litigation at the LexisNexis Bookstore.
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