## Facts

- Eleanor Kopec died in July 2001 owning, among other assets, an investment portfolio valued at about $619,418.
- Kopec’s will named her husband, Gilbert Stone, as the sole beneficiary and named her friend and long-time attorney, Michael Duffy, as executor.
- After Kopec’s death, the stock market declined, including during the period following the September 11, 2001 terrorist attacks.
- Duffy did not immediately liquidate the portfolio into cash during administration.
- Duffy formed a plan shortly after becoming executor to keep the securities invested as they were at Kopec’s death and then transfer the securities themselves to Stone as an in-kind distribution.
- Duffy maintained that the portfolio, as invested, had met Kopec’s and Stone’s income needs for years and that Kopec’s long-term plan was for Stone to receive the investments.
- As the decline developed, Duffy sought advice from a broker regarding the investments.
- In October 2002, Duffy distributed the portfolio in kind to Stone; by that time, the portfolio had decreased by about $226,750 from its date-of-death value.
- Duffy later petitioned the Surrogate’s Court for judicial settlement of his executor’s account to conclude his administration.
- Stone filed objections to the account, arguing that Duffy’s pre-distribution management was improper and that Duffy should be surcharged personally for the portfolio’s losses because Duffy failed to evaluate the holdings and protect the estate by liquidating to cash.

## Issues

1. Whether the executor breached the fiduciary duty of prudent investment by retaining the decedent’s securities portfolio during administration, rather than liquidating or repositioning it after the market began declining.
2. Whether the executor should be surcharged for the portfolio’s loss in value before distribution to the sole beneficiary.

## Decision

- The Surrogate’s Court rejected Stone’s objections seeking a surcharge.
- The court determined that, on these facts, Duffy’s decision to retain the portfolio and distribute the securities in kind did not amount to imprudent fiduciary conduct.
- The court approved the executor’s accounting as to the challenged investment-related objections and declined to impose personal liability for the market losses.

## Legal Principles

- Under New York’s prudent-investor standard, a fiduciary is judged by the reasonableness of the decision-making process and the information available at the time, not by later market results.
- A fiduciary is not a guarantor against loss; market declines alone do not establish a breach of duty.
- An executor may, depending on the circumstances, prudently retain a decedent’s existing investments during administration and distribute them in kind, especially where the plan is intentional and tied to the estate’s purposes and the decedent’s apparent intent.
- A surcharge for investment losses generally requires proof of both (a) a breach of fiduciary duty and (b) a causal link between that breach and the loss; losses attributable to general market conditions are not automatically chargeable to the fiduciary.
- Seeking professional input (such as consulting a broker when conditions change) can support a finding that the fiduciary exercised reasonable care in monitoring the investments.

## Conclusion

In *In the Matter of Michael Duffy*, the Surrogate’s Court considered a beneficiary’s attempt to surcharge an executor for a roughly $226,750 decline in an estate securities portfolio between the decedent’s death and an in-kind distribution about fifteen months later. The beneficiary contended the executor should have liquidated the holdings to preserve value, while the executor showed he made a considered choice to retain the investments consistent with the decedent’s plan, the portfolio’s history of meeting income needs, and later sought broker advice as the market fell. Applying the prudent-investor standard and rejecting hindsight-based liability for market-driven losses, the court overruled the objections and declined to hold the executor personally responsible for the decline.


In the Matter of Michael Duffy, 25 Misc. 3d 901 (2009)