Session of 1998
By Committee on Judiciary
            9             AN ACT enacting the Kansas uniform prudent investor act; repealing
10             K.S.A. 17-5004.
12       Be it enacted by the Legislature of the State of Kansas:
13           Section 1. (a) Except as otherwise provided in subsection (b), a trus-
14       tee who invests and manages trust assets owes a duty to the beneficiaries
15       of the trust to comply with the prudent investor rule set forth in this act.
16           (b) The prudent investor rule, a default rule, may be expanded, re-
17       stricted, eliminated or otherwise altered by the provisions of a trust. A
18       trustee is not liable to a beneficiary to the extent that the trustee acted
19       in reasonable reliance on the provisions of the trust.
20           Sec. 2. (a) A trustee shall invest and manage trust assets as a prudent
21       investor would, by considering the purposes, terms, distribution require-
22       ments and other circumstances of the trust. In satisfying this standard,
23       the trustee shall exercise reasonable care, skill and caution.
24           (b) A trustee's investment and management decisions respecting in-
25       dividual assets must be evaluated not in isolation but in the context of the
26       trust portfolio as a whole and as a part of an overall investment strategy
27       having risk and return objectives reasonably suited to the trust.
28           (c) Among circumstances that a trustee shall consider in investing and
29       managing trust assets are such of the following as are relevant to the trust
30       or its beneficiaries: (1) General economic conditions;
31           (2) the possible effect of inflation or deflation;
32           (3) the expected tax consequences of investment decisions or strat-
33       egies;
34           (4) the role that each investment or course of action plays within the
35       overall trust portfolio, which may include financial assets, interests in
36       closely held enterprises, tangible and intangible personal property and
37       real property;
38           (5) the expected total return from income and the appreciation of
39       capital;
40           (6) other resources of the beneficiaries;
41           (7) needs for liquidity, regularity of income and preservation or ap-
42       preciation of capital; and
43           (8) an asset's special relationship or special value, if any, to the pur-

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  1       poses of the trust or to one or more of the beneficiaries.
  2           (d) A trustee shall make a reasonable effort to verify facts relevant to
  3       the investment and management of trust assets.
  4           (e) A trustee may invest in any kind of property or type of investment
  5       consistent with the standards of this act.
  6           (f) A trustee who has special skills or expertise or is named trustee in
  7       reliance upon the trustee's representation that the trustee has special
  8       skills or expertise, has a duty to use those special skills or expertise.
  9           Sec. 3. A trustee shall diversify the investments of the trust unless
10       the trustee reasonably determines that, because of special circumstances,
11       the purposes of the trust are better served without diversifying.
12           Sec. 4. Within a reasonable time after accepting a trusteeship or re-
13       ceiving trust assets, a trustee shall review the trust assets and make and
14       implement decisions concerning the retention and disposition of assets,
15       in order to bring the trust portfolio into compliance with the purposes,
16       terms distribution requirements and other circumstances of the trust, and
17       with the requirements of this act.
18           Sec. 5. A trustee shall invest and manage the trust assets solely in the
19       interest of the beneficiaries.
20           Sec. 6. If a trust has two or more beneficiaries, the trustee shall act
21       impartially in investing and managing the trust assets, taking into account
22       any differing interests of the beneficiaries.
23           Sec. 7. In investing and managing trust assets, a trustee may only
24       incur costs that are appropriate and reasonable in relation to the assets,
25       the purposes of the trust and the skills of the trustee.
26           Sec. 8. Compliance with the prudent investor rule is determined in
27       light of the fact and circumstances existing at the time of a trustee's de-
28       cision or action and not by hindsight.
29           Sec. 9. (a) A trustee may delegate investment and management func-
30       tions that a prudent trustee of comparable skills could properly delegate
31       under the circumstances. The trustee shall exercise reasonable care, skill
32       and caution in: (1) Selecting an agent;
33           (2) establishing the scope and terms of the delegation, consistent with
34       the purposes and terms of the trust; and
35           (3) periodically reviewing the agent's actions in order to monitor the
36       agents performance and compliance with the terms of the delegation.
37           (b) In performing a delegated function, an agent owes a duty to the
38       trust to exercise reasonable care to comply with the terms of the dele-
39       gation.
40           (c) A trustee who complies with the requirements of subsection (a)
41       is not liable to the beneficiaries or to the trust for the decisions or actions
42       of the agent to whom the function was delegated.
43           (d) By accepting the delegation of a trust function from the trustee

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  1       of a trust that is subject to the law of this state, an agent submits to the
  2       jurisdiction of the courts of this state.
  3           Sec. 10. The following terms or comparable language in the provi-
  4       sions of a trust, unless otherwise limited or modified, authorizes any in-
  5       vestment or strategy permitted under this act: ``Investments permissible
  6       by law for investment of trust funds,'' ``legal investments,'' ``authorized
  7       investments,'' ``using the judgment and care under the circumstances then
  8       prevailing that persons of prudence, discretion and intelligence exercise
  9       in the management of their own affairs, not in regard to speculation but
10       in regard to the permanent disposition of their funds, considering the
11       probable income as well as the probable safety of their capital,'' ``prudent
12       man rule,'' ``prudent trustee rule,'' ``prudent person rule'' and ``prudent
13       investor rule.''
14           Sec. 11. This act applies to trusts existing on and created after the
15       effective date of this act. As applied to trusts existing on the effective date
16       of this act, this act governs only decisions or actions occurring after that
17       date.
18           Sec. 12. This act shall be applied and construed to effectuate its gen-
19       eral purpose to make uniform the law with respect to the subject of this
20       act among the states enacting it.
21           Sec. 13. This act may be cited as the Kansas uniform prudent inves-
22       tor act.
23           Sec. 14. If any provision of this act or its application to any person
24       or circumstance is held invalid, the invalidity does not affect other pro-
25       visions or applications of this act which can be given effect without the
26       invalid provision or application, and to this end the provisions of this act
27       are severable.
28           Sec. 15. K.S.A. 17-5004 is hereby repealed.
29           Sec. 16. This act shall take effect and be in force from and after its
30       publication in the statute book.