Investments Flashcards
Investments - Generally
Majority of state have enacted Uniform Prudent Investor Act which regulates investment responsibilities of the trustee.
Some states use statutory legal lists approach which establishes approved types of investments.
Grant of Discretionary Powers
If trust says that investments can be made in trustee’s discretion, then it is a question of interpretation as to whether the power is beyond the statutory duties.
If UPIA: usually allows investment that satisfy prudent investor standard
If Legal Lists: language probably frees them from the list and permits investment in a manner similar to that of UPIA.
Uniform Prudent Investor Act
Standard of care: must invest as a reasonable and prudent investor would, taking into account the purposes, terms, and distribution requirements of the trust. If have special skills, then held to that standard.
Must also act loyalty and impartially.
Prudence is evaluated as to overall investment strategy and the entire trust portfolio.
Allows any type of investment.
Factors considered in making decisions: (1) economic conditions, possible inflation or deflation, tax consequences, overall trust portfolio, total return, other resources of Bs, needs for liquidity, etc.
Must diversify unless the purpose of the trust is for otherwise.
Compliance with this act is determined as to the time the trustee made the decision/action.
Delegation of investment functions is allowed but trustee must exercise reasonable care, skill and caution in: (1) selecting agent, (2) establishing scope and terms, (3) periodically reviewing the agent’s actions.
If trustee does act in reasonable care, they are not liable for decisions or actions of agent.
Statutory Legal Lists
These set forth approved investments for trust assets.
Includes permissive and mandatory lists.
List cannot be followed blindly - must exercise reasonable care, skill, and caution.
