New legislation holds trustees to a higher standard

Abstract

The author starts with the observation that as new legislationbegins to take effect—specifically, the Uniform Prudent InvestorAct (UPIA) and the Revised Uniform Principal and Income Act(UPAIA)—trustees are under increasing pressure to exercise bestpractices in trust management. Further, as the pressure on trusteesincreases, levels of service and performance from the past nolonger meet today's higher standards. The author illustrates thedefinition of “prudent” with regard to UPIA and UPAIA andoffers specific trust management lessons to be learned as a resultof recent litigation and the subsequent judicial decisions. Then,he argues that UPIA not only requires a higher standard of duediligence on the partof trust managersbut also in fact compelsthem to consider newinvestment products, such as derivativesand exchange-traded funds. Finally,he explores the proper appli-cation of these investments as a means of risk management, aswell as the necessity of leveraging best of breed financial advis-ersfor such highly specialized instruments.

TOPICS: Legal/regulatory/public policy, wealth management, derivatives, exchange-traded funds and applications