You asked us, in response to the Agency's request, to research the laws of the States
in Region VI as those laws affect a representative payee's responsibilities for the
conservation and investment of benefit payments. The regulations provide that, after
a representative has used benefit payments for the current maintenance of the beneficiary,
any remaining amounts are to be conserved or invested on the beneficiary's behalf.
See 20 C.F.R. § 404.2045. Any such "[c]onserved funds should be invested in accordance
with the rules followed by trustees." Id. We look to state law to determine how trustees should invest funds. See POMS GN 00603.040A. Generally, states tend to follow a "prudent investor" rule.
You have asked that we examine the laws of the states in our region to determine:
(1) What investments are considered appropriate under the "prudent investor rule?"
(2) Does state law permit parent payees to invest funds belonging to their minor children
differently than other types of payees? and
(3) What rules do trustees follow when investing funds?
Our specific responses for each State are set out below.
Which types of investments are considered appropriate under the “prudent man” rule?
The prudent investor rule is found at OK. STAT. ANN. Title 60, Ch. 4, § 175.61. The
statute provides that a beneficiary may not successfully sue a trustee as long as
the trustee acted in reasonable reliance upon the terms of the trust.
OK. STAT. ANN. Title 30, Art. IV, § 4-709 (A) limits the types of investments that
a trustee or guardian can make from funds belonging to minors and incapacitated or
partially incapacitated persons. Such funds only may be invested in one or more of
Real estate and first mortgages on real property not exceeding 50% of actual value;
United States bonds or other Federally guaranteed securities or indebtedness;
Municipal corporation bonds;
Annuities covered by the Oklahoma Life and Health Insurance Guaranty Association,
not to exceed $300,000 per beneficiary; or
Interest-bearing accounts up to the amount insured by the United States Government.
OK. STAT. ANN. Title 30, Art. IV, § 4-709 (C) provides that an individual guardian
who either contracts with a bank or trust company under State or Federal supervision,
or in fact is such a bank or trust company, may invest the ward's funds under the
provisions of the Oklahoma Uniform Prudent Investor Act.
Under State law, are parent payees permitted to invest the funds belonging to their
minor children differently than other types of payees?
Oklahoma law is silent on this issue. However, the prudent investor rule appears to
assume that prudent investors are impartial and have no conflict of interest. To the
extent that a family relationship may affect such impartiality and may create a conflict
of interest, one may need to scrutinize these funds more carefully.
What are the rules followed by trustees regarding the investment of funds with which
they are entrusted?
Under OK STAT. ANN. Title 60, Ch. 4, § 175.62, trustees must provide reasonable care,
skill and caution. Investment decisions must be evaluated in the context of the trust
portfolio as a whole. Trustees must consider such factors as general economic conditions;
possible effects of inflation or deflation; tax consequences; the impact upon the
entire trust portfolio; the expected total return; the beneficiary's other resources;
the beneficiary's needs; and an asset's special relationship or value to the beneficiary
or to the trust. In addition, trustees must make a reasonable effort to verify facts
relevant to the trust assets. If they have special skills, or have become trustees
because they purported to have such skills, they must use those skills.