Exercising the Power to Adjust Between Principal and Income

January 31, 2011

Brian Corrigan co-authored a New York Law Journal article titled, “Exercising the Power to Adjust Between Principal and Income”. The article was co-authored by Charles F. Gibbs of Holland and Knight.

The Prudent Investor Act (PIA) of 1995 requires trustees to invest for total return, unless the governing instrument expressly provides otherwise. In Mr. Gibbs and Mr. Corrigan’s view, this statutory duty intensified the tension that trustees already faced in satisfying their duty of impartiality to become beneficiaries and remaindermen. Despite two statutes that significantly cured the problem in 2002, in the article, Mr. Gibbs and Mr. Corrigan discuss two aspects of the power to adjust that continue to require legislative attention: 1) what factors, if any, is a trustee required to consider in deciding whether and to what extent to exercise the power of adjustment; and 2) how many corporate trustees comply with the power.