Which types of investments are considered appropriate under the “prudent man” rule?
Iowa has adopted the Uniform Prudent Investor Act. See Iowa Code Ann. § 633.4301.
Iowa law does not specify the types of investments considered “appropriate” or “inappropriate.” A trustee may invest in any kind of property or type of investment that is consistent
with the rules set forth in the Iowa Uniform Prudent Investor Act. See Iowa Code Ann. § 633.4302(5). Compliance with the prudent investor rule is determined
in light of the facts and circumstances existing at the time of the trustee's decision
or action and not by hindsight. See Iowa Code Ann. § 633.4308.
Under State law, are parent payees permitted to invest the funds belonging to their
minor children differently than other types of payees?
Iowa law is silent on this issue. We assume the Iowa Uniform Prudent Investor Act
would apply to this situation.
What are the rules followed by trustees regarding the investment of funds with which
they are entrusted?
Trustees shall exercise reasonable care, skill, and caution. Their investment and
management decisions respecting individual assets must not be evaluated in isolation,
but in the context of the portfolio as a whole and as part of an overall investment
strategy having risk and return objectives reasonably suited to the trust. See Iowa Code Ann. § 633.4302(1) and (2).
A trustee shall consider the following when investing and managing trust assets: (1)
general economic conditions; (2) possible effect of inflation or deflation; (3) expected
tax consequences of investment decisions or strategies; (4) role that each investment
or course of action plays within the overall trust portfolio; (5) expected total return
from income and the appreciation of capital; (6) other resources of the beneficiaries;
(7) needs for liquidity, regularity of income, and preservation or appreciation of
capital; and (8) an asset's special relationship or special value. See Iowa Code Ann. § 633.4302(3)(a-h).
Trustees shall make reasonable efforts to verify facts relevant to the investment
and management of trust assets. See Iowa Code Ann. § 633.4302(4).
Iowa law does not address a situation where a trustee has special skills or expertise.
Within a reasonable time after entering into a trusteeship or receiving trust property,
a trustee shall review the trust property and make and implement decisions concerning
the retention and disposition of assets, in order to bring the trust portfolio into
compliance with the terms of the trust and the requirements of the Iowa Uniform Prudent
Investor Act. See Iowa Code Ann. § 633.4304.
Trustees have a duty of loyalty to beneficiaries and shall invest and manage the trust
assets solely in the interest of the beneficiaries. See Iowa Code Ann. § 633.4305.
Trustees shall act impartially in investing and managing trust assets, taking into
account any differing interests of the beneficiaries. See Iowa Code Ann. § 633.4306.
Trustees shall diversify the investments unless the trustee reasonably determines
that, because of special circumstances, the purposes of the trust are better served
without diversifying. See Iowa Code Ann. § 633.4303.
Iowa law does not address the delegation of investment and management functions.