TN 6 (09-02)
GN 00603.040 Investments Other Than U. S. Savings Bonds
Most States have adopted The Uniform Prudent Investor Act (UPIA) within their laws. The UPIA was approved and recommended for enactment in all States by the National Conference of Commissioners on Uniform State Laws in 1994. The UPIA provides investment rules for trustees and like fiduciaries, including representative payees, that result in greater protection of assets while providing a prospect of better income.
“Prudent investor” rules require fiduciaries to exercise reasonable care, skill, and caution, under the circumstances then prevailing, which persons of prudence, discretion, and intelligence would exercise in the management of their own affairs.
Payees may invest conserved benefits in accordance with State laws governing the investment of trust estates by trustees. Since most States apply the “prudent investor” standards to fiduciary investments, it is necessary to determine whether the investment under consideration meets this standard. Under the prudent investor standard, there is an assumption that the trustee will be impartial with no conflict of interest. Trustees may invest in every kind of property and type of investment subject to the prudent investor rule.
In most cases, no specific types of investments are required or restricted. No specific investment or course of action is, taken alone, prudent or imprudent. Trustees should diversify investments unless it is in the best interest of the beneficiary not to diversify. Investments must be evaluated in the context of all investments made for the beneficiary as a whole.
NOTE: See PR 07240.000 ff. State Laws on Investment of Conserved Funds for the Regional Chief Counsel opinions which include specific information on the laws and requirements for each State. In most cases, the Syllabus (which precedes each State opinion) summarizes whether or not the State has adopted the UPIA within its State laws. The Syllabus also highlights when State laws require or prohibit any specific type of property or investment. If the Syllabus does not provide the information needed, review the complete State opinion which follows.
FOs may also find the trust department of a local bank or a probate court officer a good source to consult for information as to the acceptability of specific investments under the “prudent investor” rule. Information obtained by the FO will be recorded on a report of contact.
If the FO/PC is unable to determine whether an investment meets the prudent investor standard described above, the case must be referred to regional programs staff for consultation with the regional attorney to determine whether the investment is proper under State law.