Wills, Trusts, and Estates
Prudent Investor Rule
- A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
- A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
- Among circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries:
- general economic conditions;
- the possible effect of inflation or deflation;
- the expected tax consequences of investment decisions or strategies;
- the role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
- the expected total return from income and the appreciation of capital;
- other resources of the beneficiaries;
- needs for liquidity, regularity of income, and preservation or appreciation of capital; and
- an asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.
- A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
- A trustee may invest in any kind of property or type of investment consistent with the standards of this [Act].
- A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.