PR 07240.011 Florida
A. PR 01-225 Investment of Conserved Funds
Date:August 13, 2001
All eight States in the Atlanta Region follow slightly different interpretations of the “prudent” person (investor) rule. Each State provides some degree of discretion to fiduciaries, including representative payees, when making decisions regarding investments. Only Georgia and Kentucky specify what investments are acceptable. Alabama and Mississippi allow greater latitude regarding what investments are appropriate. The States of Florida, North Carolina, South Carolina, and Tennessee allow for every kind of investment.
In all States, no special provisions were found for parents to follow when investing funds belonging to their minor children. All fiduciaries, including the parents of minor children, are required to follow the same general rules.
Trustees are required to use reasonable care, skill, and caution with the interest of the beneficiary as the key element. There is an assumption that the trustee will be impartial with no conflict of interest.
You asked us to research, for the eight states in the Atlanta Region, the laws concerning a representative payee's responsibilities for conserving and investing benefit payments. The specific questions concern the types of investments considered appropriate; whether parent-payees are permitted to invest differently than other types of payees; and what rules are followed by trustees. Our responses to the questions, by state, are as follows:
What types of investments are considered appropriate under the "prudent man" rule?
Under the Florida Code, "no specific investment or course of action is, taken alone, prudent or imprudent. The fiduciary may invest in every kind of property and type of investment, subject to this section. The fiduciary's investment decisions and actions are to be judged in terms of the fiduciary's reasonable business judgment regarding the anticipated effect on the investment portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action. The prudent investor rule is a test of conduct and not of resulting performance." Fla. Stat. Ann. § 518.11(1)(b) (West 2000).
The Florida Code also creates a duty to diversify, and to
pursue an investment strategy that considers both the reasonable production of income and safety of capital, consistent with the fiduciary's duty of impartiality and the purposes of the trust, estate, or guardianship. Whether investments are underproductive or overproductive of income shall be judged by the portfolio as a whole and not as to any particular asset.
Fla. Stat. Ann. § 518.11(1)(c) (West 2000).
Although inapplicable to Social Security benefits, the Florida legislature limited the types of investments a fiduciary may make with funds from the United States Department of Veterans Affairs. In general, these funds may be invested only in secured bonds issued by a government entity, utility or railroad. See Fla. Stat. Ann. § 518.01 (West 2001).
Under state law, are parent-payees permitted to invest the funds belonging to their minor children differently than other types of payees?
Because all fiduciaries have considerable discretion in making investment decisions, there are no additional limitations or grants placed on parent-payees.
What are the rules followed by trustees regarding the investment of funds with which they are entrusted?
The fiduciary has a duty to invest and manage investment assets as a prudent investor would considering the purposes, terms, distribution requirements, and other circumstances of the trust. This standard requires the exercise of reasonable care and caution and is to be applied to investments not in isolation, but in the context of the investment portfolio as a whole and as a part of an overall investment strategy that should incorporate risk and return objectives reasonably suitable to the trust, guardianship, or probate estate. If the fiduciary has special skills, or is named fiduciary on the basis of representations of special skills or expertise, the fiduciary is under a duty to use those skills. See Fla. Stat. Ann. § 518.11(1)(a) (West 2001).
The circumstances that the fiduciary may consider in making investment decisions include, without limitation, the general economic conditions, the possible effect of inflation, the expected tax consequences of investment decisions or strategies, the role each investment or course of action plays within the overall portfolio, the expected total return, including both income yield and appreciation of capital, and the duty to incur only reasonable and appropriate costs. The fiduciary may, but need not, consider related trusts, estates, and guardianships, and the income available from other sources to, and the assets of, beneficiaries when making investment decisions. Fla. Stat. Ann. § 518.11(1)(f) (West 2001); Investors Syndicate of America, Inc. v. City of Indian Rocks Beach, Fla., 434 F.2d 871 (11th Cir. 1970); Hoppe v. Hoppe, 370 So.2d 374 (Fla. App. 1978).
Each of the states within the Atlanta Region provides significant discretion to fiduciaries making decisions regarding investments. Although each state may have a slightly different definition of "prudent" man or person, only Georgia and Kentucky specifically delineate what investments are acceptable, Alabama and Mississippi allow great latitude in what investments are appropriate, and Florida, Georgia, North Carolina, South Carolina, and Tennessee allow for investment of every kind and in every kind of property.