Beneficiaries Sue Estate Trustee
Trust assets of approximately $8.5 million
Trustees should protect themselves by purchasing Trustee's Errors & Omissions (E&O) coverage which protects against allegations that the trustee did not act with all of the skill, care and diligence of a prudent person in a similar entity. The following is a case study that illustrates an all to familiar scenario in which a trustee is exposed to considerable liability.
Description of Event #1:
A deceased person's will named a trustee to handle the deceased's estate, which included three properties. The trustee liquidated the estate and distributed the proceeds in accordance with the will. The beneficiaries brought suit, alleging that the trustee was negligent in obtaining an assessment of the property values, resulting in a $250,000 loss to the estate.
Resolution:
The case was settled for nearly $165,000. The trustee incurred defense costs of more than $20,000.
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Claim Event #2
A trustee was charged to manage a family trust whose assets consisted mainly of pubicly-traded stock. After the value of the stock declined dramatically over 8 years, a court found that the trustee had been negligent in not prudently diversifying the trust's assets.
Resolution:
The court assessed the damages at $1,200,000. Considerable defense costs were incurred in addition to the settlement.
