## Facts

- John Wood II created an inter vivos trust exceeding $8 million for the benefit of his spouse, Dana Barth Wood.
- A corporate bank was named successor trustee; it later became U.S. Bank, N.A. through succession.
- At the settlor’s death, roughly 80–82% of the trust consisted of the corporate trustee’s own stock, with most remaining assets in Cincinnati Financial Corporation stock.
- The trust instrument authorized the corporate trustee to retain securities “in the same form as when received,” including shares of the corporate trustee, even if not otherwise permissible trustee investments.
- After the settlor’s death, the trustee sold about half of the Cincinnati Financial stock and about 10% of the trustee stock to pay debts and expenses, increasing the trust’s concentration in the trustee’s stock.
- By early 1999, the trustee’s stock rose to about $35 per share; Wood and her advisors orally requested diversification, but the trustee did not diversify.
- By mid-2000, the stock fell to about $16 per share; Wood alleged trust losses of about $771,099 from the failure to diversify.
- Wood sued for breach of fiduciary duty, asserting a statutory duty to diversify under Ohio’s Uniform Prudent Investor Act (UPIA).

## Issues

1. Whether a trustee has a continuing statutory duty to diversify under the UPIA when the trust authorizes retention of a specific asset, including the corporate trustee’s own stock.
2. Whether a general retention clause, without clearer language, eliminates or limits the default duty to diversify.
3. Whether the trial court erred by instructing the jury that liability required an “abuse of discretion” equivalent to dishonesty or bad faith, rather than applying the prudent investor standard.

## Decision

- The court of appeals reversed the judgment for U.S. Bank and remanded for further proceedings.
- The court held that Ohio’s UPIA imposes a continuing duty to diversify as part of the prudent investor standard.
- The court held that a trust’s authorization to “retain” assets, including the trustee’s own stock, does not by itself abrogate the duty to diversify.
- The court ruled that the trial court’s jury instructions were erroneous because they effectively required proof of dishonesty or bad faith and treated the retention clause as conferring nearly unreviewable discretion.
- The court required a new trial with jury instructions consistent with the UPIA, leaving breach and causation to be resolved by a properly instructed fact-finder.

## Legal Principles

- A trustee’s investment conduct is governed by the prudent investor standard, which includes diversification as a default obligation.
- The duty to diversify may be modified by the trust’s terms only if the instrument clearly indicates an intent to restrict or eliminate that duty.
- A retention clause authorizing a trustee to hold assets “as received,” including the trustee’s own stock, is not an automatic waiver of diversification duties.
- “Special circumstances” may justify non-diversification, but their existence and effect must be evaluated under the prudent investor framework.
- Fiduciary liability under the UPIA turns on objective prudence in light of risk and return considerations, not on proof of dishonesty or bad faith.

## Conclusion

The court required application of Ohio’s UPIA-based prudent investor standard to a trustee’s decision to maintain a highly concentrated position, holding that general retention language did not alone eliminate the duty to diversify and that the jury was improperly instructed on the governing fiduciary standard.


Wood v. U.S. Bank, N.A., 160 Ohio App. 3d 831, 828 N.E.2d 1072 (Ohio Ct. App. 1st Dist. 2005)