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.
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.
1. Which types of investments are considered appropriate under the "prudent man"
Although Nevada has not adopted the Uniform Prudent Investor Act, its law seems to
parallel the Act. Nevada's standard of care in investing and managing property is
found at Nevada Revised Statutes § 164.050.
The fiduciary may acquire every kind of property, real or personal or mixed, and every
kind of investment, including, without limitation, bonds, debentures and other corporate
obligations, and stocks, preferred or common, which persons of prudence, discretion
and intelligence acquire or retain for their own account.
2. Under State law, are parent payees permitted to invest the funds belonging to
their minor children different than other types of payees?
Nevada law is silent on this issue. However, Nevada law does speak to the duties and
powers of a custodian of a minor in dealing with custodial property belonging to a
minor. The law seems to parallel the prudent investor standard. It requires that a
custodian, in dealing with custodial property, must observe the standard of care that
would be observed by a prudent person dealing with property of another, and is not
limited by any other statute restricting investments by fiduciaries. It further provides
that, if the custodian has a special skill or expertise or is named custodian on the
basis of representation of a special skill or expertise, he must use that skill or
expertise. Nevada Revised Statutes § 167.050.
3. What are the rules followed by trustees regarding the investment of funds with
which they are entrusted?
In investing and managing property for the benefit of another, a fiduciary should
exercise the judgment and care 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 capital. The propriety of an investment
decision is to be determined by what the fiduciary knew or should have known at the
time of the decision about the inherent nature and expected performance of the investment,
the attributes of the portfolio, the general economy and the needs and objectives
of the beneficiaries.