PROPERTY CODE
CHAPTER 117. UNIFORM PRUDENT INVESTOR ACT
§ 117.001. SHORT TITLE.
Text of section effective January 1, 2004
This chapter may be cited as the "Uniform Prudent Investor
Act."
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.002. UNIFORMITY OF APPLICATION AND
CONSTRUCTION.
Text of section effective January 1, 2004
This chapter shall be applied and construed to effectuate its
general purpose to make uniform the law with respect to the subject
of this chapter among the states enacting it.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.003. PRUDENT INVESTOR RULE.
Text of section effective January 1, 2004
(a) Except as otherwise provided in Subsection (b), a
trustee who invests and manages trust assets owes a duty to the
beneficiaries of the trust to comply with the prudent investor rule
set forth in this chapter.
(b) The prudent investor rule, a default rule, may be
expanded, restricted, eliminated, or otherwise altered by the
provisions of a trust. A trustee is not liable to a beneficiary to
the extent that the trustee acted in reasonable reliance on the
provisions of the trust.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.004. STANDARD OF CARE; PORTFOLIO STRATEGY; RISK
AND RETURN OBJECTIVES.
Text of section effective January 1, 2004
(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 must 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 or strategies;
(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) other resources of the beneficiaries;
(7) needs for liquidity, regularity of income, and
preservation or appreciation of capital; and
(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.
(d) A trustee shall make a reasonable effort to verify facts
relevant to the investment and management of trust assets.
(e) Except as otherwise provided by and subject to this
subtitle, a trustee may invest in any kind of property or type of
investment consistent with the standards of this chapter.
(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.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.005. DIVERSIFICATION.
Text of section effective January 1, 2004
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.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.006. DUTIES AT INCEPTION OF TRUSTEESHIP.
Text of section effective January 1, 2004
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
this chapter.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.007. LOYALTY.
Text of section effective January 1, 2004
A trustee shall invest and manage the trust assets solely in
the interest of the beneficiaries.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.008. IMPARTIALITY.
Text of section effective January 1, 2004
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.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.009. INVESTMENT COSTS.
Text of section effective January 1, 2004
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.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.010. REVIEWING COMPLIANCE.
Text of section effective January 1, 2004
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 and not by hindsight.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.011. DELEGATION OF INVESTMENT AND MANAGEMENT
FUNCTIONS.
Text of section effective January 1, 2004
(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
terms of the delegation.
(b) In performing a delegated function, an agent owes a duty
to the trust to exercise reasonable care to comply with the terms of
the delegation.
(c) A trustee 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, unless:
(1) the agent is an affiliate of the trustee; or
(2) under the terms of the delegation:
(A) the trustee or a beneficiary of the trust is
required to arbitrate disputes with the agent; or
(B) the period for bringing an action by the
trustee or a beneficiary of the trust with respect to an agent's
actions is shortened from that which is applicable to trustees
under the law of this state.
(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.
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
§ 117.012. LANGUAGE INVOKING STANDARD OF CHAPTER.
Text of section effective January 1, 2004
The following terms or comparable language in the provisions
of a trust, unless otherwise limited or modified, authorizes any
investment or strategy permitted under this chapter: "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."
Added by Acts 2003, 78th Leg., ch. 1103, § 1, eff. Jan. 1, 2004.
