At his death, the decedent’s inter vivos trust was divided into three trusts, two for the benefit of his daughter and her descendants, and the third, a QTIP trust, for the benefit of his surviving spouse with remainder to his daughter. The QTIP trust did not provide for invasion of principal for the widow, who was the trustee. The trust terms allowed the trustee to invest in a broad range of investments “regardless of diversification.” The trustee invested 100% of the trust property in tax-free municipal bonds and the remainder beneficiary objected. The trial court granted the trustee’s motion for summary judgment and an Illinois intermediate appellate court affirmed in Carter v. Carter, 965 N.E.2d 1146 (Ill. App. Ct. 2012). The court found that the settlor’s primary intent was to provide for his widow and that the express abrogation of any duty to diversify meant that the trustee had not violated the prudent investor rule.
Special thanks to William LaPiana (Rita and Joseph Solomon Professor of Wills, Trusts, and Estates, New York Law School) for bringing this case to my attention.
