Chapter 881

CHAPTER 881

TRUST FUND INVESTMENTS

881.01   Uniform prudent investor act.

881.015   Investment companies, investment trusts and collective investment vehicles.

881.016   Employees and agents of a fiduciary.

881.02   Construction; court orders; written instruments.

881.03   Jurisdiction of court.

881.04   Investments under prior laws not affected.

881.06   Law governing existing instruments.

Ch. 881 Cross-reference Cross-reference: See definitions in ch. 851.

881.01 881.01 Uniform prudent investor act.

881.01(1) (1) Definitions. In this section:

881.01(1)(a) (a) “Beneficiary” means any of the following:

881.01(1)(a)1. 1. With respect to a will, a beneficiary, as defined in s. 851.03.

881.01(1)(a)2. 2. With respect to a trust, a beneficiary, as defined in s. 701.0103 (3).

881.01(1)(a)3. 3. With respect to guardianship of the estate, a ward for whom a guardian of the estate has been appointed.

881.01(1)(a)4. 4. With respect to a conservatorship, a person for whose estate a conservator has been appointed.

881.01(1)(b) (b) “Fiduciary” means a personal representative, trustee, conservator, guardian of the estate, a directing party, as defined in s. 701.0103 (7), who has the power to direct the trustee’s investment decisions, a trust protector, as defined in s. 701.0103 (31), who has a power exercisable in a fiduciary capacity over the investment of trust assets, and any other person to whom a court appoints a power over the investment of the assets of a decedent’s estate, a trust, a conservatorship, or a guardianship of the estate.

881.01(2) (2) Prudent investor rule.

881.01(2)(a) (a) Except as provided in s. 112.11 and except as otherwise provided in par. (b), a fiduciary who invests and manages assets owes a duty to the beneficiaries to comply with the prudent investor rule set forth in this section.

881.01(2)(b) (b) The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the provisions of a will, trust, or court order. A fiduciary is not liable to a beneficiary to the extent that the fiduciary acted in reasonable reliance on the provisions of the will, trust, or court order.

881.01(3) (3) Standard of care; portfolio strategy; risk and return objectives.

881.01(3)(a) (a) A fiduciary shall invest and manage assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the estate, trust, conservatorship, or guardianship. In satisfying this standard, the fiduciary shall exercise reasonable care, skill, and caution.

881.01(3)(b) (b) A fiduciary’s investment and management decisions about individual assets shall be evaluated, not in isolation but in the context of the portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the estate, trust, conservatorship, or guardianship.

881.01(3)(c) (c) Among circumstances that a fiduciary shall consider in investing and managing assets are those of the following that are relevant to the estate, trust, conservatorship, or guardianship or its beneficiaries:

881.01(3)(c)1. 1. General economic conditions.

881.01(3)(c)2. 2. The possible effect of inflation or deflation.

881.01(3)(c)3. 3. The expected tax consequences of investment decisions or strategies.

881.01(3)(c)4. 4. The role that each investment or course of action plays within the overall portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property.

881.01(3)(c)5. 5. The expected total return from income and the appreciation of capital.

881.01(3)(c)6. 6. Other resources of the beneficiaries.

881.01(3)(c)7. 7. Needs for liquidity, regularity of income, and preservation or appreciation of capital.

881.01(3)(c)8. 8. An asset’s special relationship or special value to the purposes of the estate, trust, conservatorship, or guardianship or to one or more of the beneficiaries.

881.01(3)(d) (d) A fiduciary shall make a reasonable effort to verify facts relevant to the investment and management of assets.

881.01(3)(e) (e) A fiduciary may invest in any kind of property or type of investment consistent with the standards of this section.

881.01(3)(f) (f) A fiduciary who has special skills or expertise, or who is named fiduciary in reliance upon the fiduciary’s representation that the fiduciary has special skills or expertise, has a duty to use those special skills or expertise.

881.01(4) (4) Diversification.

881.01(4)(a) (a) General rule. A fiduciary shall diversify investments unless the fiduciary reasonably determines that because of special circumstances the purposes of the estate, trust, conservatorship, or guardianship are better served without diversifying.

881.01(4)(b) (b) Special rule for assets collected by a fiduciary.

881.01(4)(b)1. 1. For purposes of this paragraph, an “asset that is collected by the fiduciary” means an asset that the fiduciary did not exercise discretion over to acquire or purchase.

881.01(4)(b)2. 2. Notwithstanding par. (a), a fiduciary may retain an asset that is collected by the fiduciary until the fiduciary reasonably determines that it is advisable to dispose of the asset. While the asset is being retained, the fiduciary has a duty to exercise discretion at reasonable intervals to determine the advisability of continuing to retain or disposing of the asset that was collected.

881.01(4)(b)3. 3. At any time while an asset that is collected by the fiduciary is being retained, a beneficiary may file an application with a court that has jurisdiction over the fiduciary to compel the fiduciary to sell the asset and invest the sale proceeds in accordance with this section.

881.01(4)(b)4. 4. If a beneficiary files an application under subd. 3., the court shall conduct a hearing after giving notice to all interested persons, as determined by the court. After the hearing, the court shall enter an order directing the fiduciary to retain or sell the asset that is being retained based on what the court finds to be in accordance with the terms and purposes of the estate, trust, conservatorship, or guardianship of the estate and the interests of the beneficiaries.

881.01(5) (5) Duties at inception. Within a reasonable time after accepting a fiduciary appointment or receiving assets, a fiduciary shall review the assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the estate, trust, conservatorship, or guardianship and with the requirements of this section.

881.01(6) (6) Loyalty. A fiduciary shall invest and manage the assets solely in the interest of the beneficiaries.

881.01(7) (7) Impartiality. If an estate, trust, conservatorship, or guardianship has 2 or more beneficiaries, the fiduciary shall act impartially in investing and managing the assets, taking into account the differences between the interests of the beneficiaries.

881.01(8) (8) Investment costs. In investing and managing assets, a fiduciary may incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the estate, trust, conservatorship, or guardianship, and the skills of the fiduciary.

881.01(9) (9) Reviewing compliance. Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a fiduciary’s decision or action and not by hindsight.

881.01(10) (10) Delegation of investment and management functions.

881.01(10)(a) (a) A fiduciary may delegate investment and management functions that a prudent fiduciary of similar skills could properly delegate under the circumstances. The fiduciary shall exercise reasonable care, skill, and caution in all of the following:

881.01(10)(a)1. 1. Selecting an agent.

881.01(10)(a)2. 2. Establishing the scope and terms of the delegation, consistent with the purposes and terms of the estate, trust, conservatorship, or guardianship.

881.01(10)(a)3. 3. Periodically reviewing the agent’s actions to monitor the agent’s performance and compliance with the terms of the delegation.

881.01(10)(b) (b) In performing a delegated function, an agent owes a duty to the estate, trust, conservatorship, or guardianship to exercise reasonable care to comply with the terms of the delegation.

881.01(10)(c) (c) A fiduciary who complies with the requirements of par. (a) is not liable to the beneficiaries or to the estate, trust, conservatorship, or guardianship for the decisions or actions of the agent to whom a function was delegated.

881.01(10)(d) (d) By accepting the delegation of a function from the fiduciary of an estate, trust, conservatorship, or guardianship that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.

881.01(11) (11) Phrases invoking standard of this section. The following phrases or similar phrases in a will, trust, or court order, unless otherwise limited or modified, authorize any investment or strategy permitted under this section: “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.”

881.01(12) (12) Application to existing estates, trusts, conservatorships, and guardianships. This section applies to estates, trusts, conservatorships, and guardianships of the estate existing on, or created on or after, April 30, 2004. As applied to estates, trusts, conservatorships, and guardianships of the estate existing on April 30, 2004, this section governs only decisions or actions occurring after that date.