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Settlor's will created a trust to pay income to her son, Felix, for life, with principal to Felix's children at his death. The trust instrument gave Trustee "broad investment discretion" but did not waive fiduciary duties. At funding, 85 percent of the trust consisted of stock in one publicly traded technology company that Settlor had worked for decades earlier. The stock had no special voting control and was easily marketable.
For seven years, Trustee made no written investment plan, did not review Felix's income needs, and retained the stock because Trustee "liked the company." Trustee later hired an investment adviser after one lunch meeting, gave no written instructions, and never reviewed the adviser's quarterly reports. The adviser left the trust in the same concentrated position. The stock then fell 60 percent after a product failure. A diversified portfolio would have suffered a 12 percent loss during the same period.
Did Trustee breach fiduciary duties? Discuss prudence, diversification, delegation, and the appropriate remedy if a breach is found.