You asked us to research a representative payee's responsibilities for the conservation
and investment of benefit payments. You asked that we consider this issue with respect
to the laws of the six states in Region I. The specific questions presented by you
concern which types of investments are considered appropriate for a trustee under
the "prudent man" rule; whether parental-payees are permitted to invest differently
than other types of payees; and what rules trustees must follow in making investments
with funds that are held in trust. We herein provide answers to these questions with
respect to each New England state.
NEW HAMPSHIRE
Which types of investments are considered appropriate under the “prudent man” rule?
The Uniform Prudent Investor Act has been adopted in New Hampshire as the Uniform
Trustees' Powers Act. New Hampshire Revised Statutes Chapter 564-A:3-b564-A:10.
The Trustee has the power to collect, hold and retain trust assets and to deposit
such assets into a bank or to invest them. No specific types of investments are required
or restricted. The trustee may invest in every kind of property and type of investment,
subject to the prudent investor rule. The trustee has a duty to diversify investments
unless it is prudent under the circumstances not to do so.
Under State law, are parent payees permitted to invest the funds belonging to their
minor children differently than other types of payees?
New Hampshire law does not make specific rules on trusts for minor children. However,
there is an assumption that the prudent investor be impartial and with no conflict
of interest. To the extent that a family relationship may be a barrier to 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?
Trustees have a duty to provide reasonable care, skill and caution. They should diversify
unless it is in the best interest of the beneficiary not to diversify and should have
a strategy for the fund as a whole. The trustees must use reasonableness, prudence,
and diligence and must be impartial with no conflict of interest.
CONCLUSION
All six of our states have incorporated the Prudent Investor Act within their laws.
We believe that a fair reading of the laws in each of these states would require that
a representative payee use reasonable care, skill, and caution with the interest of
the beneficiary as the key element. We believe that the facts and circumstances of
each case determine whether the representative payee has acted with the required care,
skill and caution and that the test is a test of conduct and not of results. We would
note that the Uniform Prudent Investor Act generally specifies that this rule may
be "expanded, restricted, eliminated, or otherwise altered by the provisions of the
trust." Thus, if SSA were to decide to restrict the types of investments that representative
payees were to make with Social Security or Supplemental Security Income funds, the
payee would be bound by those limitations and could not make other investments based
on reliance upon the Uniform Prudent Investor Act. In addition, the Uniform Prudent
Investor Act generally permits a trustee to delegate investment and management functions,
and SSA might wish to consider placing some limitations or restriction on this right.