Does a failure to invest in a diverse range of assets necessarily favor one beneficiary over the other?

• A. Yes.
• B. No.
• C. It depends on the trust terms.
• D. Only if the failure is intentional.

Answer: (B)

Diversification spreads risk so the trust isn’t tied to the performance of a single investment. A failure to diversify does not inherently favor one beneficiary over another because the impact is on the trust’s overall value and risk, which affects all beneficiaries. The exact effect can vary with market moves and the trust’s distribution terms, but the act of not diversifying itself isn’t a guaranteed boost for any particular beneficiary. So the best answer is that it does not necessarily favor one beneficiary.