Trustee Standard of Care

A trustee is required to exercise reasonable care, skill, and caution in the effectuation of his duties and decision-making. A trustee has an affirmative fiduciary obligation – and therefore the implied authority – to seek out the advice of consultant, advisors, and experts if it is prudent to do so and if the like are necessary for the proper administration of the trust.

It follows from the requirement of care as well as sound policy that, if the trustee possesses a degree of skill greater than that of an individual of ordinary intelligence, the trustee is liable for a loss that results from failure to make reasonably diligent use of that skill. So also, if a trustee, such as a corporate or professional fiduciary, procured appointment as trustee by expressly or impliedly representing that it possessed greater skill than that of an individual of ordinary intelligence, or if the trustee has or represents that it has special facilities for investment management, the trustee is liable for a loss that results from failure to make reasonably diligent use of that skill or of those special facilities.
1

It is permissible for the terms of the trust to break out certain fiduciary responsibilities and allocate them exclusively to a co-trustee or agent. It is not permissible for a trustee to neglect beneficiary interests, or imprudently hire or fail to oversee duties delegated to advisors or agents.
2 A trustee exercises reasonable diligence if he maintains reasonable routines for communicating significant information to the agent or advisor having responsibility to act and there is reasonable compliance with the routines. At core, a trustee must maintain reasonable reliance on the provisions of the trust. A trustee is not responsible, however, for a co-trustee’s breach of standards or care unless the trustee participated in, approved, acquiesced in, or concealed the breach, or failed o take what steps were necessary to compel the cotrustee to redress the breach.3

1 Restatement (Third) of Trusts §90 cmt. d.
2 Restatement (Third) of Trusts §80 cmt. h.
3 Restatement (Third) of Trusts §8(2).