Under trust, who bears the losses not attributed to a breach of trust or bad faith?

In the context of trust law, particularly regarding Unit Investment Trust Funds (UITF), the trustor, also referred to as the client, typically bears the losses that are not due to a breach of trust or bad faith. This principle underscores the notion that when an investment performs poorly due to market fluctuations or other external factors beyond the control of the trustee or investment manager, the trustor assumes the risk associated with their investment.

Trustees are expected to manage the trust assets with a certain degree of care and loyalty but are not liable for losses that arise from legitimate market activity or investment risks that were disclosed to the trustor. The trustor, having made the decision to invest, accepts the inherent risks and potential losses tied to the investment strategy pursued by the trust.

While other roles in a trust framework (such as the trustee, investment manager, and financial advisor) play crucial roles in managing and advising on the investments, they are not liable for outcomes that do not stem from their misconduct or failure to adhere to the terms of the trust. Thus, when losses occur within the boundaries of proper management, it is the trustor who ultimately bears that responsibility.