When you are a beneficiary or party to a trust in Miami, you and other interested parties may find it frustrating that all of the power related to the management of the trust seemingly lies with the trustee. While the settlor of the trust may have designated certain assets and property to pass to you, that will only happen when the conditions stipulated by the governing instrument are met. Until then, the responsibility to oversee (and hopefully, to grow) those assets remains with the trustee. If the trust article stipulates that its assets are to generate income, then the trustee may tasked with investing them. Yet how much discretion does he or she have in doing so?
When investing trust assets, a trustee is required to adhere to the prudent investor rule. According to Florida’s state statutes, that means he or she must do the following:
- After being named trustee, review the trust’s current investment portfolio and retain or dispose of any investment according to the provisions of this rule.
- Invest and manage the investment assets of a trust as any prudent investor would given the purposes, terms, distribution requirements and other circumstances created by the trust article.
- Diversify all trust investment unless the trustee reasonably believes doing so will not accomplish its stated purposes.
- Pursue an investment strategy with both the reasonable production of income and the safety of capital in mind.
- Make investments based upon factors such as general economic conditions, the potential for inflation, the anticipated tax consequences, how individual actions may affect the trust’s complete portfolio, the expected return and the duty to incur only reasonable costs.
Keep in mind that this rule is meant to be a test of the trustee’s conduct and not based upon the overall performance of his or her investments.
