Different Standards for Professional and Non-professional Trustees?
Melanie B. Leslie (Professor of Law, Cardozo Law School) has recently published her article entitled Common Law, Common Sense: Fiduciary Standards and Trustee Identity, 27 Cardozo L. Rev. 2713 (2006).
Here is the conclusion of her article:
There are sound reasons to have separate fiduciary standards for non-professional and professional trustees. Courts intuitively understand this, and have developed fact-specific standards to take account of the particular difficulties that non-professional trustees face. The argument that classic fiduciary rules should be weakened to protect the non-professional should be rejected; generally, courts offer adequate protection to non-professionals. Traditional fiduciary rules, such as the no further inquiry rule and the prohibition against delegation of the investment function, grew organically from the need to compensate for information asymmetries and market imperfections in the trust context. Because the UTC and other statutes gut those strict standards, they will generate serious costs for beneficiaries in the coming years. To the extent those statutes suggest that courts ought to abandon the sensible common law approach to fiduciary duty issues, they are severely misguided.