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.
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.
1. Which types of investments are considered appropriate under the "prudent man" rule?
The prudent investor rule is found at Arizona Revised Statutes Article 6, § 14-7601,
Arizona Probate Code.
No specific types of investments are required or restricted. No specific investment
or course of action is, taken alone, deemed prudent or imprudent. The trustee may
invest in any kind of property or type of investment consistent with the standards
of Article 6 of Arizona Probate Code.
2. Under State law, are parent payees permitted to invest the funds belonging to their
minor children different than other types of payees?
Arizona law is silent on this issue.
3. What are the rules followed by trustees regarding the investment of funds with which
they are entrusted?
The law of Arizona provides that 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 should
exercise reasonable care, skill and caution. Further, investment and management decisions
should not be evaluated 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. Arizona Probate Code, § 14-7602.
Note, Arizona law also imposes a duty of loyalty and impartiality: A trustee must
invest and manage trust assets solely in the interest of the beneficiaries. Arizona
Probate Code §14-7605. If the trust has two or more beneficiaries, the trustee must
act impartially in investing and managing the trust assets, taking into account any
differing interests in beneficiaries. Arizona Probate Code § 14-7606.