PR 07240.012 Georgia

A. PR 01-225 Investment of Conserved Funds

Date: August 13, 2001

1. SYLLABUS

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.

2. OPINION

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:

GEORGIA

What types of investments are considered appropriate under the "prudent man" rule?

The Georgia Code formerly had a "prudent person" rule which allowed an "executor or trustee" to "acquire and retain every kind of property and every kind of investment," Ga. Code Ann. 53-8-2(b)-(c) (1997); however, this statutory section was revised, effective January 1, 1998. See 1996 Ga. Laws, p. 504, § 10, amended by 1998 Ga. Laws, p. 1586, § 41. The official Comment to section 53-8-1 of The Revised Probate Code of 1998 notes that this section applies to all personal representatives, whereas the former Code section applied only to executors. The revised Code now states that when making any investments and acquiring and managing property and investments, a "personal representative"

shall exercise the judgment and care, under the circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.

Ga. Code Ann. § 53-8-1(b) (1998). Within the limitations of the above standard,

a personal representative is authorized to acquire and retain every kind of property whether real, personal, or mixed, and every kind of investment, specifically including, but not by way of limitation, bonds, debentures, and other corporate obligations and stocks, preferred or common…."

Ga. Code Ann. § 53-8-1(c) (1998). A personal representative is authorized to invest estate funds in real property after first obtaining an order to that effect from the probate court or from the superior court. See Ga. Code. Ann. § 53-8-2 (1998). A personal representative is authorized to make the following specific investments:

(1) Bonds issued by any county or municipality of this state which have been validated as required by law for the validation of county and municipal bonds;

(2) Bonds issued by any county board of education under Subpart 1 of Part 3 of Article 9 of Chapter 2 of Title 20 for the purpose of building and equipping schoolhouses, which bonds have been validated and confirmed as required under Part 1 of Article 2 of Chapter 82 of Title 36;

(3) Bonds and other securities issued by this state or by the Board of Regents of the University System of Georgia;

(4) Bonds or other obligations issued by the United States government and bonds of any corporation created by an act of Congress, the bonds of which are guaranteed by the United States government as provided in Code Section 53-8-4; and

(5) Interest-bearing deposits in any chartered state or national bank or trust company or savings and loan association located in this state to the extent the deposits are insured by the Federal Deposit Insurance Corporation or comparable insurance.

Ga. Code. Ann. § 53-8-3 (1998). A personal representative is also authorized to invest funds in "direct and general obligations of the United States government, obligations unconditionally guaranteed by the United States government, or obligations of the agencies of the United States government…." Ga. Code. Ann. § 53-8-4(a) (1998). The personal representative may invest in and hold obligations either directly or in the form of securities or other interests in any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, so long as:

(1) The portfolio of such investment company or investment trust is limited to such obligations and repurchase agreements fully collateralized by such obligations;

(2) Such investment company or investment trust takes delivery of such collateral either directly or through an authorized custodian; and

(3) Such investment company or investment trust is operated so as to provide a constant net asset value or price per share.

Id.; see also Citizens and Southern Nat. Bank v. Haskins, 254 Ga. 131, 327 S.E.2d 192 (Ga. 1985); Perling v. Citizens and Southern Nat. Bank, 250 Ga. 674, 300 S.E.2d 649 (Ga. 1983); Simpson v. Brand, 108 Ga.App. 393, 133 S.E.2d 393 (Ga.App., Sep. 04, 1963).

Under state law, are parent-payees permitted to invest the funds belonging to their minor children differently than other types of payees?

We found no special provisions for parents of minor children.

What are the rules followed by trustees regarding the investment of funds with which they are entrusted?

The Georgia Code identifies appropriate investments for trust funds. See Ga. Code. Ann. § 53-12-280 (1998). This statute essentially provides that investments can be made in state bonds and securities and in obligations guaranteed by the U.S. government or obligations issued by federal agencies. The specific provisions follows:

Authorized investments of trust funds; interest; other investments.

Any trustee holding trust funds may invest the same in bonds or other securities issued by this state, making a true return of the price paid and time of purchase. The investments shall be free from taxation as long as they are held for the trust estate. Trustees are also authorized to invest trust funds in direct and general obligations of the United States government, obligations unconditionally guaranteed by the United States government, or obligations of agencies of the United States government issued by the Federal Land Bank, Federal Home Loan Bank, Federal Intermediate Credit Bank, and Central Bank for Cooperatives. No person, firm, corporation, or association shall be liable to account for a greater rate of interest than the amount actually received on the investment. Any other investments of trust funds shall be made under an order of the superior court or shall be at the risk of the trustee. Deposits of funds at interest in any chartered state or national bank or trust company located in this state and insured by the Federal Deposit Insurance Corporation shall be deemed investments; and the deposits are authorized as legal investments, to the extent that the deposits are insured by the Federal Deposit Insurance Corporation, without any order or authority from any court.

Ga. Code. Ann. § 53-12-280 (1998).

CONCLUSION

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.


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PR 07240.012 - Georgia - 02/06/2004
Batch run: 01/27/2009
Rev:02/06/2004