Proving Damages in a Prudent Investor Rule Case: what Florida beneficiaries can learn from a recent Kansas case

Are you the beneficiary of a Florida trust?  It’s no big secret that many trust beneficiaries in Florida don’t like trustees.  After all, a trust beneficiary needs to ask, or request, the Florida trustee for money, which the trust beneficiary may consider his or her, or his or her family’s, money.    No one likes to ask another for money, especially when you think it’s YOUR money.  So, beneficiaries need to check this angst before getting mad at trustees for investment losses. Be reflective and carefully analyze your angst with an experienced trust litigator or trust trial attorney.   A recent federal case in Kansas handed down just days ago sheds light on when a trust beneficiary sues a trustee for violating the prudent investor rule. It reminds us that before a beneficiary spends money on a trust lawyer to sue a trustee,  they need to carefully analyze how the trust assets were invested, how you plan to prove the case, and how you are going to demonstrate that the trust actually suffered investment losses.    In the trust world, trust litigators would refer to this as proving issues of causation and injury or damages. In the non legal world of trusts, a beneficiary may simply ask:  “How ya gonna prove your case?”  No damages: no case.  If you don’t analyze your case and facts (or lack of facts) and prepare properly, the plaintiff, the trust beneficiary, runs the risk of losing before trial… and not even getting a trial !    In the recent prudent investor rule case, beneficiaries of a trust sued a corporate trustee for trust losses purportedly incurred since 2000, when the trust was created under a will.   Kansas has a prudent investor rule similar to Florida’s prudent investor rule.  The trust beneficiaries alleged that the trustee invested trust assets poorly.  The corporate trustee hired an expert to provide expert testimony to the court.  The trustee’s defense demonstrated that the trust assets, the trust investment portfolio, out-performed a major stock market index, the S&P 500, and the trust diminished in part because there had been trust distributions of money for the benefit of beneficiaries.  While the trust beneficiaries complained of certain mutual funds in the trust, and of losses incurred from 2001-2008, the court did not just look at that “snapshot” of time, but rather noted that through 2011, after the Great Recession, the trust’s value actually bounced back.  This demonstrates the difficulty trust beneficiaries have in trying to demonstrate damages over a select period of time.  The court pointed out that the trustee had the discretion to invest prudently , as they saw fit, to comply with the prudent investor act, and that beneficaries’ complaint that the trustee did not invest trust assets as the beneficiary had wanted, was un-moving.   The trustee won on a pre trial motion and the beneficiaries never even got to a trial.   Case preparation is important.  Proving damages and causation:  very important.