In the San Francisco Region, the States of Arizona, California, and Hawaii have adopted The Uniform Prudent Investor Act (UPIA) within their laws. While Nevada has not adopted the UPIA, its laws appear to parallel those of the UPIA.

NOTE: See below for information on the Territory of Guam.

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

In each State, trustees must 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. Trustees may invest in every kind of property and type of investment subject to the prudent investor rule. 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.

Arizona and Nevada's State laws are silent on the issue of whether parent payees are permitted to invest funds belonging to their minor children differently than other types of payees. However, it appears that both Arizona and Nevada agree in theory with the State laws for California and Hawaii which indicate that parents must follow the same standards as other types of trustees.

Territory of Guam

The Territory of Guam has not adopted the UPIA and refers to the “prudent man” standard only in relation to the Uniform Gift to Minors Act. Its laws allow an estate representative to make deposits in banks or insured savings and loans licensed to do business in the Territory. For other types of investments, the estate representative must petition the court for instructions and direction.

There are no laws governing the types of investments parents may make for their minor children. Parents have no control over the property of their children. For minors with guardians, the guardian may be regulated and controlled by the court.

Trustees must obey the trust and, at a minimum, is responsible for accumulating simple interest on the monies held in trust, provide reasonable security for those funds, and follow frugal management standards.

QUESTION

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.

ANSWER

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.

SUMMARY

Guam:

1. Which types of investments are considered appropriate under the “prudent man” rule?

Under Title 19, Personal Relationships, § 12104(e), Uniform Gifts to Minors Act, refers to the “prudent man” standard. That section states: “The custodian, notwithstanding statutes restricting investments by fiduciaries, shall invest and reinvest the custodial property as would a prudent man of discretion and intelligence who is seeking reasonable income and the preservation of his capital…”

Title 15, Estates and Probate, § 2217, allows an estate representative to make deposits in banks or insured savings and loans, licensed to do business in the Territory of Guam. For other types of investments, the estate representative must petition the court for instructions and direction. § 2217.

2. Under Guam law, are parent payees permitted to invest the funds belonging to their minor children differently than other types of investments?

There are no laws governing the types of investments parents may make for their minor children. Under Title 19, Personal Relationships, § 4111 states: “Parents have no control over the property of their children.” For minors with guardians, § 9110 provides: “In the management and disposition of the person or property committed to him, a guardian may be regulated and controlled by the court.” Title 15, Estates and Probate, § 4103 reads: “Every guardian of an estate must manage it frugally and without waste, and apply income, as far as may be necessary to the comfort and suitable support, maintenance and education of the ward and his family … .” There are no further guidelines for persons who may be investing the funds of a minor.

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

Guam has not adopted the Uniform Prudent Investor Act. The rules which govern the acts of trustees are described in Title 18, Business Structures and Functions, Chapters 65 and 66. The duty of the trustee is to obey the trust. “Trustee must obey the trust. A trustee must fulfill the purpose of the trust, as declared at its creation, and must follow all the directions of the trustor given at that time, except as modified by the consent of all the parties interested, in the same manner, and to the same extent, as an employee .” § 66201

The investment of funds by a trustee is governed by § 66204. “A trustee must invest money received by him under the trust, as fast as he collects a sufficient amount, in such manner as to afford reasonable security and interest for the same.” If a trustee omits to invest the money in accordance with § 66204, then he must pay simple interest thereon. § 66205.

At a minimum, it seems the trustee is responsible for accumulating simple interest on the monies held in trust and a duty to provide reasonable security for those funds. No other rules or guidelines are provided.

The Guam Codes mention the prudent man, only in conjunction with gifts to minors but not the investment of their funds. Other Sections of the Code speak to a sense of conservative investments, which will bring at least simple interest, reasonable security and frugal management standards.

Special Note: Many of the Guam Code sections carry a California Code source. We have listed the Guam Codes with their corresponding California Code sections below. Many of the California cites have been superceded by new sections or numbers. The case of Roberto v. Aguon, 519 F. 2d 754 (9th Cir. 1975) held that California decisions, with regard to identical statutes, are controlling on Guam courts if they predate the enactment of Guam's statutes. It is likely Guam courts would follow any California court decisions with regard to the questions posed above.