Duty to Diversify

A bank acting as conservator drafted a new estate plan forits ward, which included the creation of two CRATs for which the bank wastrustee.  Both trusts included language authorizing the trustee to retainproperty received and exculpated the trustee from liability for good faithretention of assets despite any resulting risk or lack ofdiversification.  The trusts were funded entirely with the stock of asingle corporation.  The trustee prepared an investment plan and withintens months of funding the trusts were fully diversified although the value ofthe original shares had greatly declined.  The charitable remainderbeneficiaries sued and the intermediate Indiana appellate court upheld summaryjudgment for the trustee, holding that the trust language overrode the duty todiversify and the exculpatory clause was valid, not being the result ofoverreaching.  Americans forthe Arts v. Ruth Lilly Charitable Remainder Annuity Trust, 855 N.E.2d592 (Ind.App. 2006).