Brad Pettit—Senior Attorney, National Legal Research Group
It is not uncommon for trustees of trusts to encounter beneficiaries that pressure them into retaining a particular asset or investment even though the retention thereof might pose an unreasonable risk with respect to the performance of the overall portfolio and subject the trustee to potential liability to the beneficiaries for breach of the fiduciary duty to diversify the trust's investments. P.G. Guthrie, Annotation, Duty of Trustee to Diversify Investments, and Liability for Failure to Do So, 24 A.L.R.3d 730 (1969). In such a situation, the trust instrument itself may contain a provision that expressly or impliedly relieves the trustee from liability for retaining certain assets that might pose a risk to the performance of the overall trust portfolio. M.L. Cross, Annotation, Construction and Effect of Instrument Authorizing or Directing Trustee or Executor to Retain Investments Received Under Such Instrument, 47 A.L.R.2d 187 (1956). But in a case where a trust instrument does not excuse the trustee from potential liability for retaining risky investments, such as an overconcentrated position in a particular stock or class of investments, is there anything that the trustee can do to avoid liability to a beneficiary who is exerting extreme pressure on him or her to retain a favored parcel of real estate, stock, or class of stocks?
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