Executors and Trustees are fiduciaries who are obligated to manage and invest the assets under their control in accordance with strict statutory requirements called the Prudent Investor Rule. The Prudent Investor Rule requires fiduciaries to undertake specific steps to review the portfolio of assets they assume control over, to then make changes to that portfolio as necessary to bring the investments in-line with the requirements of the Prudent Investor Act. This is a “process driven” activity which requires careful and regular documentation.
Our firm has experience in advising fiduciaries on the requirements of the Prudent Investor Act and has developed in-house forms and procedures to document compliance with the statutory requirements. Importantly, our firm has also been involved in litigation representing beneficiaries in cases where Trustees failed to comply with the requirements imposed on fiduciaries.
Fortunately, a properly advised fiduciary can follow procedures that provide a safe harbor to them against future allegations of mismanagement. A fiduciary’s conduct is measured by compliance with the procedures imposed by law, not measured by particular outcomes in the marketplace. By documenting the process a fiduciary followed in managing a portfolio, a beneficiary’s complaints and charges of breach of duty should be avoided.