CHAPTER 117. UNIFORM PRUDENT INVESTOR ACT - Texas Statutes

PROPERTY CODE

TITLE 9. TRUSTS

SUBTITLE B. TEXAS TRUST CODE: CREATION, OPERATION, AND

TERMINATION OF TRUSTS

CHAPTER 117. UNIFORM PRUDENT INVESTOR ACT

Sec. 117.001. SHORT TITLE. This chapter may be cited as the

"Uniform Prudent Investor Act."

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.002. UNIFORMITY OF APPLICATION AND CONSTRUCTION. This

chapter shall be applied and construed to effectuate its general

purpose to make uniform the law with respect to the subject of

this chapter among the states enacting it.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.003. PRUDENT INVESTOR RULE. (a) Except as otherwise

provided in Subsection (b), a trustee who invests and manages

trust assets owes a duty to the beneficiaries of the trust to

comply with the prudent investor rule set forth in this chapter.

(b) The prudent investor rule, a default rule, may be expanded,

restricted, eliminated, or otherwise altered by the provisions of

a trust. A trustee is not liable to a beneficiary to the extent

that the trustee acted in reasonable reliance on the provisions

of the trust.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.004. STANDARD OF CARE; PORTFOLIO STRATEGY; RISK AND

RETURN OBJECTIVES. (a) A trustee shall invest and manage trust

assets as a prudent investor would, by considering the purposes,

terms, distribution requirements, and other circumstances of the

trust. In satisfying this standard, the trustee shall exercise

reasonable care, skill, and caution.

(b) A trustee's investment and management decisions respecting

individual assets must be evaluated not in isolation but in the

context of the trust portfolio as a whole and as a part of an

overall investment strategy having risk and return objectives

reasonably suited to the trust.

(c) Among circumstances that a trustee shall consider in

investing and managing trust assets are such of the following as

are relevant to the trust or its beneficiaries:

(1) general economic conditions;

(2) the possible effect of inflation or deflation;

(3) the expected tax consequences of investment decisions or

strategies;

(4) the role that each investment or course of action plays

within the overall trust portfolio, which may include financial

assets, interests in closely held enterprises, tangible and

intangible personal property, and real property;

(5) the expected total return from income and the appreciation

of capital;

(6) other resources of the beneficiaries;

(7) needs for liquidity, regularity of income, and preservation

or appreciation of capital; and

(8) an asset's special relationship or special value, if any, to

the purposes of the trust or to one or more of the beneficiaries.

(d) A trustee shall make a reasonable effort to verify facts

relevant to the investment and management of trust assets.

(e) Except as otherwise provided by and subject to this

subtitle, a trustee may invest in any kind of property or type of

investment consistent with the standards of this chapter.

(f) A trustee who has special skills or expertise, or is named

trustee in reliance upon the trustee's representation that the

trustee has special skills or expertise, has a duty to use those

special skills or expertise.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.005. DIVERSIFICATION. A trustee shall diversify the

investments of the trust unless the trustee reasonably determines

that, because of special circumstances, the purposes of the trust

are better served without diversifying.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.006. DUTIES AT INCEPTION OF TRUSTEESHIP. Within a

reasonable time after accepting a trusteeship or receiving trust

assets, a trustee shall review the trust assets and make and

implement decisions concerning the retention and disposition of

assets, in order to bring the trust portfolio into compliance

with the purposes, terms, distribution requirements, and other

circumstances of the trust, and with the requirements of this

chapter.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.007. LOYALTY. A trustee shall invest and manage the

trust assets solely in the interest of the beneficiaries.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.008. IMPARTIALITY. If a trust has two or more

beneficiaries, the trustee shall act impartially in investing and

managing the trust assets, taking into account any differing

interests of the beneficiaries.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.009. INVESTMENT COSTS. In investing and managing trust

assets, a trustee may only incur costs that are appropriate and

reasonable in relation to the assets, the purposes of the trust,

and the skills of the trustee.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.010. REVIEWING COMPLIANCE. Compliance with the prudent

investor rule is determined in light of the facts and

circumstances existing at the time of a trustee's decision or

action and not by hindsight.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.011. DELEGATION OF INVESTMENT AND MANAGEMENT FUNCTIONS.

(a) A trustee may delegate investment and management functions

that a prudent trustee of comparable skills could properly

delegate under the circumstances. The trustee shall exercise

reasonable care, skill, and caution in:

(1) selecting an agent;

(2) establishing the scope and terms of the delegation,

consistent with the purposes and terms of the trust; and

(3) periodically reviewing the agent's actions in order to

monitor the agent's performance and compliance with the terms of

the delegation.

(b) In performing a delegated function, an agent owes a duty to

the trust to exercise reasonable care to comply with the terms of

the delegation.

(c) A trustee who complies with the requirements of Subsection

(a) is not liable to the beneficiaries or to the trust for the

decisions or actions of the agent to whom the function was

delegated, unless:

(1) the agent is an affiliate of the trustee; or

(2) under the terms of the delegation:

(A) the trustee or a beneficiary of the trust is required to

arbitrate disputes with the agent; or

(B) the period for bringing an action by the trustee or a

beneficiary of the trust with respect to an agent's actions is

shortened from that which is applicable to trustees under the law

of this state.

(d) By accepting the delegation of a trust function from the

trustee of a trust that is subject to the law of this state, an

agent submits to the jurisdiction of the courts of this state.

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.

Sec. 117.012. LANGUAGE INVOKING STANDARD OF CHAPTER. The

following terms or comparable language in the provisions of a

trust, unless otherwise limited or modified, authorizes any

investment or strategy permitted under this chapter: "investments

permissible by law for investment of trust funds," "legal

investments," "authorized investments," "using the judgment and

care under the circumstances then prevailing that 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 funds, considering the

probable income as well as the probable safety of their capital,"

"prudent man rule," "prudent trustee rule," "prudent person

rule," and "prudent investor rule."

Added by Acts 2003, 78th Leg., ch. 1103, Sec. 1, eff. Jan. 1,

2004.