When appointed as a trustee in Woodland Hills, one of the duties assigned to you by the trust article may be to invest trust assets in an attempt to grow them. When doing so, you are held to a standard designated in the California Probate Code as the Uniform Prudent Investor Act. Understanding the exact investment responsibilities inherent with your role may be vital if you hope to avoid being accused of malfeasance by the trust's beneficiaries.
As the name implies, the Uniform Prudent Investor Act requires that you manage the trust's investments as any prudent investor would. That includes following an overall investment strategy with goals that are in-line with the objectives of the trust. Those objectives include the stated need for liquidity, preservation or appreciation of the trusts' assets, as well as its ability to generate income.
According to the law, “prudent” considerations regarding investments include:
- The current economic climate
- The potential for inflation or deflation
- The tax consequences
- The expected total return and appreciation of the trust’s capital
- The special significance or value a beneficiary may assign to a particular trust asset
- The resources of the trust’s beneficiaries
On top of all that, you are also required to consider how each individual investment action may impact the entire trust portfolio.
If you so wish, you can delegate the task of investing to a qualified agent. In selecting an agent, you are required to exercise the same prudence used in investing trust assets. You must also periodically review the agent’s performance to determine if he or she is complying with the authority you delegated to him or her.
Provided that you meet the requirements for prudent action as defined by this law, you cannot be held liable for relying on the Act’s provisions to produce solid returns.