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.

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.

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

Nevada:

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

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.