prudent person standard in New York

2026Notably, "the very nature of the prudent person standard dictates against any absolute rule that a fiduciary's failure to diversify, in and of itself, constitutes imprudence, as well as against a rule invariably immunizing a fiduciary from its failure to diversify in the absence of some selective list of elements of hazard" ( Matter of Janes , 90 NY2d at 50 ; see Matter of Hyde , 44 AD3d 1195, 1197 [3d Dept 2007], lv denied 9 NY3d 1027 [2008 [*6] ]).

2026Second, although the reports by petitioner's experts tended to show that gradual diversification was industry standard and plausibly justifiable, "[n]o precise formula exists for determining whether the prudent person standard has been violated in a particular situation; rather, the determination depends on an examination of the facts and circumstances of each case" ( Matter of Janes , 90 NY2d at 50 ).

2016Here, there is no real dispute that respondent failed to meet the prudent person standard, that is, that he failed to exercise “such diligence and such prudence in the care and management of the fund as in general, prudent men [or women] of discretion and intelligence in such matters, employ in their own like affairs” (Matter of Donner, 82 NY2d 574, 585 [1993] [internal quotation marks, brackets and citations omitted]; see Matter of Janes, 223 AD2d 20, 26-27 [1996], affd 90 NY2d 41 [1997]).

2016Here, there is no real dispute that respondent failed to meet the prudent person standard, that is, that he failed to exercise “such diligence and such prudence in the care and management of the fund as in general, prudent men [or women] of discretion and intelligence in such matters, employ in their own like affairs” (Matter of Donner, 82 NY2d 574, 585 [1993] [internal quotation marks, brackets and citations omitted]; see Matter of Janes, 223 AD2d 20, 26-27 [1996], affd 90 NY2d 41 [1997]).

2012From 1970 to 1995, the standard of care was the prudent person rule established in EPTL 11-2.2 (a) (1), which provided that “[a] fiduciary holding funds for investment may invest the same in such securities as would be acquired by prudent [persons] of discretion and intelligence in such matters who are seeking a reasonable income and preservation of their capital” (see Matter of Janes, 90 NY2d 41, 49 [1997], rearg denied 90 NY2d 885 [1997]; Matter of Rowe, 274 AD2d 87, 90-91 [2000], lv denied 96 NY2d 707 [2001]).

2007Prior to January 1, 1995, New York followed the prudent person rule of investment, which “required that a trustee employ diligence and prudence in the care and management of a trust equivalent to that of a prudent person of discretion and intelligence in managing his or her own affairs” (Matter of Saxton, 274 AD2d 110, 118 [2000]; see Matter of Rowe, 274 AD2d 87, 90-91 [2000], lv denied 96 NY2d 707 [2001]). “[T]he prudent person standard dictates against any absolute rule that a fiduciary’s failure to diversify, in and of itself, constitutes imprudence” (Matter of Janes, 90 NY2d 41, 50 [1997];

2026First, the prudent person standard requires "a balanced and perceptive analysis of [the fiduciary's] consideration and action in the light of the history of each individual investment, viewed at the time of its action or its omission to act" ( Matter of Bank of N.Y. , 35 NY2d 512, 519 [1974]).

2000During petitioner’s administration of the trust, New York followed the “prudent person rule” of investment (EPTL former 11-2.2 [a] [1]), * which provided: “A fiduciary holding funds for investment may invest the same in the kinds and classes of securities described in the succeeding subparagraphs, provided that investment is made only in such securities as would be acquired by prudent [persons] of discretion and intelligence in such matters who are seeking a reasonable income and the preservation of their capital.” To determine whether the prudent person standard has been violated, the court s

2025Thus, the determination of whether a fiduciary's conduct measures up to the appropriate standards of prudence, vigilance, and care generally presents an issue of fact for the trial court (Matter of Donner, 82 NY2d 574, 585 [1993] [citing Matter of Hubbell, 302 NY 246, 258 (1951)]).

2025Thus, the determination of whether a fiduciary's conduct measures up to the appropriate standards of prudence, vigilance, and care generally presents an issue of fact for the trial court (Matter of Donner, 82 NY2d 574, 585 [1993] [citing Matter of Hubbell, 302 NY 246, 258 (1951)]).

2026Footnote 3 In our view, the lack of a divest-by date in an objection is not fatal to the pleading, as the reasonable time for divestment — that is, the date of the breach of the prudent person rule — may not be discernable without discovery and the development of a record ( see generally SCPA 302 [2]; Matter of Saxton , 274 AD2d at 117-119).

2007Prior to January 1, 1995, New York followed the prudent person rule of investment, which “required that a trustee employ diligence and prudence in the care and management of a trust equivalent to that of a prudent person of discretion and intelligence in managing his or her own affairs” (Matter of Saxton, 274 AD2d 110, 118 [2000]; see Matter of Rowe, 274 AD2d 87, 90-91 [2000], lv denied 96 NY2d 707 [2001]). “[T]he prudent person standard dictates against any absolute rule that a fiduciary’s failure to diversify, in and of itself, constitutes imprudence” (Matter of Janes, 90 NY2d 41, 50 [1997];

2026Notably, "the very nature of the prudent person standard dictates against any absolute rule that a fiduciary's failure to diversify, in and of itself, constitutes imprudence, as well as against a rule invariably immunizing a fiduciary from its failure to diversify in the absence of some selective list of elements of hazard" ( Matter of Janes , 90 NY2d at 50 ; see Matter of Hyde , 44 AD3d 1195, 1197 [3d Dept 2007], lv denied 9 NY3d 1027 [2008 [*6] ]).

2012And, the diversification provisions of the Prudent Investor Act are “generally consistent with the diversification standards already developed by the courts under the prudent person rule” (Matter of Hyde, 44 AD3d 1195, 1198 [2007] [citations omitted]).

2016Here, there is no real dispute that respondent failed to meet the prudent person standard, that is, that he failed to exercise “such diligence and such prudence in the care and management of the fund as in general, prudent men [or women] of discretion and intelligence in such matters, employ in their own like affairs” (Matter of Donner, 82 NY2d 574, 585 [1993] [internal quotation marks, brackets and citations omitted]; see Matter of Janes, 223 AD2d 20, 26-27 [1996], affd 90 NY2d 41 [1997]).

2016Here, there is no real dispute that respondent failed to meet the prudent person standard, that is, that he failed to exercise “such diligence and such prudence in the care and management of the fund as in general, prudent men [or women] of discretion and intelligence in such matters, employ in their own like affairs” (Matter of Donner, 82 NY2d 574, 585 [1993] [internal quotation marks, brackets and citations omitted]; see Matter of Janes, 223 AD2d 20, 26-27 [1996], affd 90 NY2d 41 [1997]).

2016Given this, and based on our review of the record evidence, Surrogate’s Court clearly did not abuse its discretion in awarding damages in the amount of $5,718.64 to compensate petitioners for the loss of rental income that should have been paid to the estate (see Matter of Rowe, 274 AD2d 87, 92 [2000], lv denied 96 NY2d 707 [2001]; Matter of Everhart, 226 AD2d 892, 893 [1996]).

2016Given this, and based on our review of the record evidence, Surrogate’s Court clearly did not abuse its discretion in awarding damages in the amount of $5,718.64 to compensate petitioners for the loss of rental income that should have been paid to the estate (see Matter of Rowe, 274 AD2d 87, 92 [2000], lv denied 96 NY2d 707 [2001]; Matter of Everhart, 226 AD2d 892, 893 [1996]).

2025In 1970, this common-law standard was codified, and the governing standard, which became known as the prudent person rule, provided that "[a] fiduciary holding funds for investment [after May 1, 1970] may invest the same in such securities as would be acquired by prudent men of discretion and intelligence in such matters who are seeking a reasonable income and preservation of their capital" (EPTL 11-2.2[a][l]; see also Matter of Knox, 98 AD3d at 306 ).

2025In 1970, this common-law standard was codified, and the governing standard, which became known as the prudent person rule, provided that "[a] fiduciary holding funds for investment [after May 1, 1970] may invest the same in such securities as would be acquired by prudent men of discretion and intelligence in such matters who are seeking a reasonable income and preservation of their capital" (EPTL 11-2.2[a][l]; see also Matter of Knox, 98 AD3d at 306 ).

2015Although petitioner stipulated that it could not determine who managed Trust III between 1966 and 1975 and that it did not have annual review forms for that period, objectants nevertheless failed to establish that any loss was caused by such failure (see generally Matter of Hahn, 93 AD2d 583, 587-588 [1983], affd, 62 NY2d 821 [1984]; Knox, 98 AD3d at 311 ).

1997No precise formula exists for determining whether the prudent person standard has been violated in a particular situation; rather, the determination depends on an examination of the facts and circumstances of each case (see, Purdy v Lynch, 145 NY 462, 475 ; see also, Matter of Hahn, 62 NY2d 821, 824 ).

2026Notably, "the very nature of the prudent person standard dictates against any absolute rule that a fiduciary's failure to diversify, in and of itself, constitutes imprudence, as well as against a rule invariably immunizing a fiduciary from its failure to diversify in the absence of some selective list of elements of hazard" ( Matter of Janes , 90 NY2d at 50 ; see Matter of Hyde , 44 AD3d 1195, 1197 [3d Dept 2007], lv denied 9 NY3d 1027 [2008 [*6] ]).

2026Footnote 4 Because respondent's amended objection concerns petitioner's management of assets in the subject trust between 1973 and 1982 — in particular, the 90% of the subject trust's original JCP position that petitioner liquidated in that time frame — we do not consider whether petitioner's gradual diversification of JCP stock runs afoul of the more exacting prudent investor standard that came into effect on January 1, 1995 ( see EPTL 11-2.3 [a], [b]; see generally Matter of Hyde , 44 AD3d 1195, 1197 [3d Dept 2007], lv denied 9 NY3d 1027 [2008]).

2025"No precise formula exists for determining whether the prudent person standard has been violated in a particular situation; rather, the determination depends on an examination of the facts and circumstances of each case" ( Matter [*5]of Janes , 90 NY2d 41, 50 [1997] [citations omitted]; see Matter of Blaine , 209 AD3d 1124, 1126 [3d Dept 2022]).

2022"No precise formula exists for determining whether the prudent person standard has been violated in a particular situation; rather, the determination depends on an examination of the facts and circumstances of each [*3]case" ( Matter of Janes , 90 NY2d 41, 50 [1997] [citations omitted]; see Matter of Skelly , 284 AD2d 336, 336 [2d Dept 2001]).

2015Although petitioner stipulated that it could not determine who managed Trust III between 1966 and 1975 and that it did not have annual review forms for that period, objectants nevertheless failed to establish that any loss was caused by such failure (see generally Matter of Hahn, 93 AD2d 583, 587-588 [1983], affd, 62 NY2d 821 [1984]; Knox, 98 AD3d at 311 ).

2007Prior to January 1, 1995, New York followed the prudent person rule of investment, which “required that a trustee employ diligence and prudence in the care and management of a trust equivalent to that of a prudent person of discretion and intelligence in managing his or her own affairs” (Matter of Saxton, 274 AD2d 110, 118 [2000]; see Matter of Rowe, 274 AD2d 87, 90-91 [2000], lv denied 96 NY2d 707 [2001]). “[T]he prudent person standard dictates against any absolute rule that a fiduciary’s failure to diversify, in and of itself, constitutes imprudence” (Matter of Janes, 90 NY2d 41, 50 [1997];

2007Rather, “[t]he inquiry is simply whether, under all the facts and circumstances of the particular case, the fiduciary violated the prudent person standard in maintaining a concentration of a particular stock in the estate’s portfolio of investments” (Matter of Janes, 90 NY2d at 51 ; see Matter of Saxton, 274 AD2d at 118-119; see also Matter of Strong, 289 AD2d 798, 799-800 [2001]).

2007Rather, “[t]he inquiry is simply whether, under all the facts and circumstances of the particular case, the fiduciary violated the prudent person standard in maintaining a concentration of a particular stock in the estate’s portfolio of investments” (Matter of Janes, 90 NY2d at 51 ; see Matter of Saxton, 274 AD2d at 118-119; see also Matter of Strong, 289 AD2d 798, 799-800 [2001]).

1997Indeed, in various cases, courts have *51 determined that a fiduciary’s retention of a high concentration of one asset in a trust or estate was imprudent without reference to those elements of hazard (see, Matter of Dormer, supra, at 585-586; see also, Matter of Curtiss, 261 App Div 964 , affd without opn 286 NY 716 ; Cobb v Gramatan Natl.

1997Indeed, in various cases, courts have *51 determined that a fiduciary’s retention of a high concentration of one asset in a trust or estate was imprudent without reference to those elements of hazard (see, Matter of Dormer, supra, at 585-586; see also, Matter of Curtiss, 261 App Div 964 , affd without opn 286 NY 716 ; Cobb v Gramatan Natl.