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
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.