QUESTION
On behalf of the Acting Associate Commissioner for Program Benefits, you requested
that we research the laws in Region IX's states and territories concerning the authority
of representative payees to invest conserved funds of beneficiaries. You noted that
the applicable regulations provide that conserved funds be invested in accordance
with the rules followed by trustees.
ANSWER
Arizona, California and Hawaii have adopted the Uniform Prudent Investor Act which
sets out the duties of a trustee. Although the Act does not expressly mandate or prohibit
specific types of investments, a trustee must exercise reasonable care, skill and
caution in managing and investing assets. The Uniform Prudent Investor Act does not
impose special rules on parents acting as trustees.
Guam and Nevada have not adopted the Uniform Prudent Investor Act. In Guam, a trustee
must obey the trust and has a duty to provide reasonable security for the assets.
He must at least accumulate simple interest on monies held in trust. A guardian must
manage assets frugally and without waste, and apply the assets as necessary for the
comfort and suitable support, maintenance and education of the ward. In Nevada, a
trustee may acquire any kind of investment which "persons of prudence, discretion
and intelligence acquire or retain for their own account." A custodian of a minor's
property must observe the standard of care that would be observed by a prudent person
dealing with the property of another.
The following is a summary of each state/territory's law in alphabetical order.
SUMMARY
Guam:
1. Which types of investments are considered appropriate under the “prudent man” rule?
Under Title 19, Personal Relationships, § 12104(e), Uniform Gifts to Minors Act, refers
to the “prudent man” standard. That section states: “The custodian, notwithstanding statutes restricting investments by fiduciaries, shall
invest and reinvest the custodial property as would a prudent man of discretion and
intelligence who is seeking reasonable income and the preservation of his capital…”
Title 15, Estates and Probate, § 2217, allows an estate representative to make deposits
in banks or insured savings and loans, licensed to do business in the Territory of
Guam. For other types of investments, the estate representative must petition the
court for instructions and direction. § 2217.
2. Under Guam law, are parent payees permitted to invest the funds belonging to their
minor children differently than other types of investments?
There are no laws governing the types of investments parents may make for their minor
children. Under Title 19, Personal Relationships, § 4111 states: “Parents have no control over the property of their children.” For minors with guardians, § 9110 provides: “In the management and disposition of the person or property committed to him, a guardian
may be regulated and controlled by the court.” Title 15, Estates and Probate, § 4103 reads: “Every guardian of an estate must manage it frugally and without waste, and apply
income, as far as may be necessary to the comfort and suitable support, maintenance
and education of the ward and his family … .” There are no further guidelines for persons who may be investing the funds of a minor.
3. What are the rules followed by trustees regarding the investment of funds with
which they are entrusted?
Guam has not adopted the Uniform Prudent Investor Act. The rules which govern the
acts of trustees are described in Title 18, Business Structures and Functions, Chapters
65 and 66. The duty of the trustee is to obey the trust. “Trustee must obey the trust. A trustee must fulfill the purpose of the trust, as
declared at its creation, and must follow all the directions of the trustor given
at that time, except as modified by the consent of all the parties interested, in
the same manner, and to the same extent, as an employee .” § 66201
The investment of funds by a trustee is governed by § 66204. “A trustee must invest money received by him under the trust, as fast as he collects
a sufficient amount, in such manner as to afford reasonable security and interest
for the same.” If a trustee omits to invest the money in accordance with § 66204, then he must pay
simple interest thereon. § 66205.
At a minimum, it seems the trustee is responsible for accumulating simple interest
on the monies held in trust and a duty to provide reasonable security for those funds.
No other rules or guidelines are provided.
The Guam Codes mention the prudent man, only in conjunction with gifts to minors but not the investment of
their funds. Other Sections of the Code speak to a sense of conservative investments,
which will bring at least simple interest, reasonable security and frugal management
standards.
Special Note: Many of the Guam Code sections carry a California Code source. We have listed the
Guam Codes with their corresponding California Code sections below. Many of the California
cites have been superceded by new sections or numbers. The case of Roberto v. Aguon, 519 F. 2d 754 (9th Cir. 1975) held that California decisions, with regard to identical
statutes, are controlling on Guam courts if they predate the enactment of Guam's statutes.
It is likely Guam courts would follow any California court decisions with regard to
the questions posed above.
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G. Code Ann.
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CA Code Source
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Title 15 Guam Codes Ann.
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§4103 (1993)
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Probate C. 1502 same
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§2217 (1993)
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Probate C. 585 now §9700
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§2221 (1993)
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Probate C. 588 now §9611
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Title 18 Guam Codes Ann.
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§66201 (1992)
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Civil C. 2258 now Probate C. §16000 et seq.
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§66204 (1992)
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Civil C. 2261 now Probate C. §16040
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§66205 (1992)
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Civil C. 2262 now Probate C. §16440
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Title 19 Guam Codes Ann.
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§4111 (1994)
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Civil C. 202, now Family C. §3012
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§9110 (1993)
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Civil C. 251, now Family C. §4402
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§12104(e) (1993)
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Civil C. 1156, now Probate C. 3404, 3409 to 3411
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