Which types of investments are considered appropriate under the “prudent man” rule?
Nebraska has adopted the Uniform Prudent Investor Act. See Neb. Rev. Stat. § 8-2201.
Nebraska 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 Nebraska Uniform Prudent Investor Act. See Neb. Rev.
Stat. § 8-2203(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 Neb. Rev. Stat. § 8-2209.
Under State law, are parent payees permitted to invest the funds belonging to their
minor children differently than other types of payees?
Nebraska law is silent on this issue. We assume the Nebraska 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 Neb. Rev. Stat. § 8-2203(1) and (2).
Circumstances a trustee shall consider when investing and managing trust assets include
the following: (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 Neb. Rev. Stat. § 8-2203(3)(a-k).
Trustees shall make reasonable efforts to verify facts relevant to the investment
and management of trust assets. See Neb. Rev. Stat. § 8-2203(4).
Trustees with special skills or expertise have a duty to use those special skills
or expertise. See Neb. Rev. Stat. § 8-2203(6).
Within a reasonable time after entering into a trusteeship or receiving trust assets,
a trustee shall review the trust assets 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 Nebraska Uniform
Prudent Investor Act. See Neb. Rev. Stat. § 8-2205.
Trustees have a duty of loyalty to beneficiaries and shall invest and manage the trust
assets solely in the interest of the beneficiaries. See Neb. Rev. Stat. § 8-2206.
Trustees shall act impartially in investing and managing trust assets, taking into
account any differing interests of the beneficiaries. See Neb. Rev. Stat. § 8-2207.
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 Neb. Rev. Stat. § 8-2204
A trustee may delegate investment and management functions that a prudent trustee
of comparable skills could properly delegate under the circumstances. See Neb. Rev. Stat. § 8-2210.