We get asked a lot about two categories of cases: (1) cases about discretionary distributions; and (2) cases about concentrations and diversification. And, it’s easy to understand why – fiduciaries are often given a great amount of discretion in exercising their duties, but then may get sued over it. While there seems to be a growing number of decisions dealing with matters like undue influence and lack of capacity, the numbers of authorities regarding the exercise of discretionary powers and diversification/concentrations are still limited.
That’s why when an opinion like that of the Illinois Court of Appeals in Carter v. Carter comes along, we have to take notice. In this case, the court considered a breach of fiduciary duty claim arising from the trustee’s alleged strategy of investing only in tax-free municipal bonds. The appellate court determined that this strategy did not violate the prudent investor rule or any fiduciary duty owed by the trustee. Let’s see why. . . (more…)