Substitute Senate Bill No. 1315
Substitute Senate Bill No. 1315
PUBLIC ACT NO. 97-140
AN ACT CONCERNING THE CONNECTICUT UNIFORM PRUDENT
INVESTOR ACT.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. (NEW) Sections 1 to 13, inclusive,
of this act may be cited as the "Connecticut
Uniform Prudent Investor Act".
Sec. 2. (NEW) (a) Except as provided in
subsection (b) of this section, a trustee who
invests and manages trust assets owes a duty to
the beneficiaries of the trust to comply with the
prudent investor rule, as set forth in sections 1
to 13, inclusive, of this act.
(b) The prudent investor rule is a default
rule that may be expanded, restricted, eliminated
or otherwise altered by provisions of the trust. A
trustee is not liable to a beneficiary to the
extent that the trustee acted in reasonable
reliance on provisions of the trust.
Sec. 3. (NEW) (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 shall 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, strategies and
distributions; (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)
related trusts and other income and resources of
the beneficiaries; (7) needs for liquidity, for
regularity of income and for preservation or
appreciation of capital; (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; (9) the size of the portfolio; and
(10) the nature and estimated duration of the
trust.
(d) A trustee shall take reasonable steps to
verify facts relevant to the investment and
management of trust assets.
(e) Subject to the standard of sections 1 to
13, inclusive, of this act, a trustee may invest
in any kind of property or type of investment.
(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.
Sec. 4. (NEW) 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.
Sec. 5. (NEW) 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 sections 1 to 13, inclusive, of
this act.
Sec. 6. (NEW) A trustee shall invest and
manage the trust assets solely in the interest of
the beneficiaries.
Sec. 7. (NEW) 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.
Sec. 8. (NEW) 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.
Sec. 9. (NEW) The prudent investor rule
expresses a standard of conduct, not outcome.
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.
Sec. 10. (NEW) (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 scope and terms of the
delegation.
(b) In performing a delegated function, an
agent owes a duty to the trustee and to the trust
to exercise reasonable care to comply with the
scope and terms of the delegation and to exercise
the delegated function with reasonable care, skill
and caution. An attempted exoneration of the agent
from liability for failure to meet such a duty is
contrary to public policy and void.
(c) A trustee who complies with the
requirements of subsection (a) of this section is
not liable to the beneficiaries or to the trust
for the decisions or actions of the agent to whom
the function was delegated.
(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
and can be held liable by the courts of this state
for any breach of duty arising out of the
delegation agreement or the terms of sections 1 to
13, inclusive, of this act.
Sec. 11. (NEW) The following terms or
comparable language in a trust instrument, unless
otherwise limited or modified by the instrument,
authorizes any investment or strategy permitted
under sections 1 to 13, inclusive, of this act:
"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".
Sec. 12. (NEW) Sections 1 to 13, inclusive, of
this act shall be applied and construed to
effectuate their general purpose to make uniform
the law with respect to the subject of said
sections among the states enacting them.
Sec. 13. (NEW) This act applies to trusts
existing on and created after the effective date
of this act. As applied to trusts existing on the
effective date of this act, this act governs only
decisions or actions occurring after that date.
Sec. 14. Section 45a-532 of the general
statutes is repealed and the following is
substituted in lieu thereof:
In the administration of the powers to
appropriate appreciation, to make and retain
investments and to delegate investment management
of institutional funds, members of a governing
board shall exercise [ordinary business care and
prudence under the facts and circumstances
prevailing at the time of the action or decision.
In so doing they shall consider long and short
term needs of the institution in carrying out its
educational, religious, charitable or other
eleemosynary purposes, its present and anticipated
financial requirements, expected total return on
its investments, price level trends and general
economic conditions] CARE AND PRUDENCE IN
ACCORDANCE WITH THE STANDARDS ESTABLISHED BY THE
CONNECTICUT UNIFORM PRUDENT INVESTOR ACT, SECTIONS
1 TO 13, INCLUSIVE, OF THIS ACT.
Approved June 13, 1997