SENATE BILL No. 503
An Act enacting the Kansas uniform prudent investor act;
repealing K.S.A. 17-5004.
Be it enacted by the Legislature of the State of Kansas:
Section 1. (a) Except as otherwise
provided in subsection (b), a fi-
duciary who invests and manages trust assets owes a duty to the
ciaries of the trust to comply with the prudent investor rule set
(b) The prudent investor rule, a default
rule, may be expanded, re-
stricted, eliminated or otherwise altered by the provisions of a
fiduciary is not liable to a beneficiary to the extent that the
in reasonable reliance on the provisions of the trust.
(c) As used in this act, ``fiduciary''
means a personal representative
or a trustee. The term includes an executor, administrator,
sonal representative, special administrator, and a person
stantially the same function.
Sec. 2. (a) A fiduciary shall
invest and manage trust assets as a pru-
dent investor would, by considering the purposes, terms,
requirements and other circumstances of the trust. In satisfying
dard, the fiduciary shall exercise reasonable care, skill and
(b) A fiduciary's investment and
management decisions respecting
individual assets must be evaluated not in isolation but in the
the trust portfolio as a whole and as a part of an overall
having risk and return objectives reasonably suited to the
(c) Among circumstances that a fiduciary
shall consider in investing
and managing trust assets are such of the following as are relevant
trust or its beneficiaries: (1) General economic conditions;
(2) the possible effect of inflation or
(3) the expected tax consequences of
investment decisions or strat-
(4) the role that each investment or
course of action plays within the
overall trust portfolio, which may include financial assets,
closely held enterprises, tangible and intangible personal property
(5) the expected total return from income
and the appreciation of
(6) other resources of the beneficiaries
who are eligible to receive
discretionary payments of trust income or principal assets;
(7) needs for liquidity, regularity of
income and preservation or ap-
preciation of capital; and
(8) an asset's special relationship or
special value, if any, to the pur-
poses of the trust or to one or more of the beneficiaries.
(d) A fiduciary shall make a reasonable
effort to verify facts relevant
to the investment and management of trust assets.
(e) A fiduciary may invest in any kind of
property or type of invest-
ment consistent with the standards of this act.
(f) A fiduciary who has special skills or
expertise or is placed in a
fiduciary capacity in reliance upon the fiduciary's representation
fiduciary has special skills or expertise, has a duty to use those
skills or expertise.
Sec. 3. A fiduciary shall diversify
the investments of the trust unless
the fiduciary reasonably determines that, because of special
stances, the purposes of the trust are better served without
Sec. 4. Within a reasonable time
after entering into a fiduciary re-
lationship or receiving trust assets, a fiduciary shall review the
and make and implement decisions concerning the retention and
sition of assets, in order to bring the trust portfolio into
the purposes, terms distribution requirements and other
of the trust, and with the requirements of this act.
Sec. 5. A fiduciary shall invest
and manage the trust assets solely in
the interest of the beneficiaries.
Sec. 6. If a trust has two or more
beneficiaries, the fiduciary shall act
impartially in investing and managing the trust assets, taking into
any differing interests of the beneficiaries.
Sec. 7. In investing and managing
trust assets, a fiduciary may only
incur costs that are appropriate and reasonable in relation to the
the purposes of the trust and the skills of the fiduciary.
Sec. 8. Compliance with the prudent
investor rule is determined in
light of the fact and circumstances existing at the time of a
decision or action and not by hindsight.
Sec. 9. (a) A fiduciary may
delegate investment and management
functions that a prudent fiduciary of comparable skills could
delegate under the circumstances. For a fiduciary to properly
investment functions under this subsection, the fiduciary
(1) Exercise reasonable care, skill and
caution in selection of the in-
vestment agent, in establishing the scope and specific terms of any
egation and in periodically reviewing the investment agent's
order to monitor overall performance and compliance with the scope
specific terms of the delegation;
(2) conduct an inquiry into the
experience, performance history, er-
rors and omissions coverage, professional licensing or
registration, if any,
and financial stability of the investment agent; and
(3) if a trust, send written notice of
such trust's intention to begin
delegating investment functions under this section to each
eligible to receive income from the trust on the date of the
gation at least 30 days before such delegation. This notice shall
until or unless each beneficiary eligible to receive income from
at the time are notified to the contrary, authorize the fiduciary
investment functions pursuant to this section.
(b) In performing a delegated function,
an investment agent shall be
subject to the same standards that are applicable to the
(c) An investment agent shall be liable
to each beneficiary of the trust
and to the designated fiduciary to the same extent as if the
agent were a designated fiduciary in relation to the exercise or
of the investment function.
(d) A fiduciary 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.
(e) By accepting the delegation of a
trust function from the fiduciary
of a trust that is subject to the law of this state, an agent
submits to the
jurisdiction of the courts of this state.
Sec. 10. Conservators shall not
invest funds under their control and
management in investments other than those specifically permitted
K.S.A. 59-3019 and amendments thereto, except upon the entry of
order of a court of competent jurisdiction, after a hearing on a
petition. Before authorizing any such investment, the court shall
evidence of value and advisability of such purchase.
Sec. 11. The following terms or
comparable language in the provi-
sions of a trust, unless otherwise limited or modified, authorizes
vestment or strategy permitted under this act: ``Investments
by law for investment of trust funds,'' ``legal investments,''
investments,'' ``using the judgment and care under the
prevailing that persons of prudence, discretion and intelligence
in the management of their own affairs, not in regard to
in regard to the permanent disposition of their funds, considering
probable income as well as the probable safety of their capital,''
man rule,'' ``prudent trustee rule,'' ``prudent person rule'' and
Sec. 12. This act applies to trusts
existing on and created after the
effective date of this act. As applied to trusts existing on the
of this act, this act governs only decisions or actions occurring
Sec. 13. This act shall be applied
and construed to effectuate its gen-
eral purpose to make uniform the law with respect to the subject of
act among the states enacting it.
Sec. 14. This act may be cited as
the Kansas uniform prudent inves-
Sec. 15. If any provision of this
act or its application to any person
or circumstance is held invalid, the invalidity does not affect
visions or applications of this act which can be given effect
invalid provision or application, and to this end the provisions of
Sec. 16. K.S.A. 17-5004 is hereby
Sec. 17. This act shall take effect
and be in force from and after its
publication in the statute book.
Approved April 7, 2000.