Burn the Rembrandt? Trust Law’s Limits on the Settlor’s Power to Direct Investments

Abstract

In the December 2008 issue of the Boston University Law Review, Jeffrey Cooper published an article in which he criticized both the benefit-thebeneficiaries standard and an article of mine, published in 2004, discussing that standard. My article suggested that the clarification of the rule against capricious purposes found in the Restatement and the UTC would have a salutary effect in one corner of trust investment law, by limiting the power of a trust settlor to insist that the trustee follow investment practices that are demonstrably harmful to the interests of the beneficiaries. Cooper's article sounds a contrary theme of extreme deference to settlor power. He contends that trust law has allowed the settlor "nearly unfettered latitude" over the terms of the trust, and that trust law should "provide no aid in cases where a settlor intentionally and thoughtfully impaired beneficiaries' economic rights." The present Essay responds to Cooper. Part I examines the balance that trust law strikes between implementing the settlor's donative intent and protecting the interests of trust beneficiaries in the transferred property. Part II probes Cooper's claims that trust law should not prevent a settlor from requiring trust assets to be invested in a fashion manifestly harmful to the interests of the trust's beneficiaries.