ARIZONA PRUDENT INVESTOR RULE
2019 Arizona Revised Statutes
Title 14 – Trusts, Estates and Protective Proceedings
ARTICLE 9 – PRUDENT INVESTOR RULE
14-10901. Prudent investor rule
A. Except as 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 requirements of this article.
B. The prudent investor rule is a default rule and may be expanded, restricted, eliminated or otherwise altered by the provisions of a trust.
C. A trustee is not liable to a beneficiary to the extent that the trustee acted in reasonable reliance on the provisions of the trust.
14-10902. Standard of care; portfolio strategy; risk and return objectives
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 not be evaluated 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 any of the following that 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, specialty assets, alternative investments, 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.
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. A trustee may invest in any kind of property or type of investment consistent with the standards of this article.
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.
14-10904. Duties at inception of trusteeship
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 article.
14-10905. Reviewing compliance
Compliance with this article is determined in light of the facts and circumstances existing at the time of a trustee’s decision or action and not by hindsight.
14-10906. Prudent investor rule; language to invoke standard
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 article:
1. Investments permissible by law for investment of trust funds.
2. Legal investments.
3. Authorized investments.
4. 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.
5. Prudent man rule.
6. Prudent trustee rule.
7. Prudent person rule.
8. Prudent investor rule.
14-10907. Delegation of investment and management functions; duties; limitations
A. A fiduciary may delegate investment and management functions that a prudent investor of comparable skills might delegate under the circumstances.
B. A fiduciary is not responsible for the investment decisions or actions of the investment agent to which the investment functions are delegated if the fiduciary exercises reasonable care, skill and caution in selecting the investment agent, in establishing the scope and specific terms of the delegation and in reviewing periodically the investment agent’s actions in order to monitor the investment agent’s performance and compliance with the scope and specific terms of the delegation.
C. The investment agent must comply with the scope and terms of the delegation and exercise the delegated function with reasonable care, skill and caution and is liable to the trust if the agent fails to do so. An investment agent who represents that the agent has special investment skills must exercise those skills.
D. An investment agent who accepts the delegation of a fiduciary’s function from a fiduciary who is subject to the jurisdiction of a court of this state is deemed to have submitted to the jurisdiction of that court even if the delegation agreement provides for a different jurisdiction or venue.
E. A cofiduciary may delegate investment and management functions to another cofiduciary if the delegating cofiduciary reasonably believes that the other cofiduciary has greater investment skills than the delegating cofiduciary with respect to those functions. The delegating cofiduciary is not responsible for the investment decisions or actions of the other cofiduciary to which the investment function are delegated if the delegating cofiduciary exercises reasonable care, skill and caution in establishing the scope and specific terms of the delegation and in reviewing periodically the other cofiduciary’s actions in order to monitor the cofiduciary’s performance and compliance with the scope and specific terms of the delegation.
F. Investment in a mutual fund is not a delegation of investment function and neither the mutual fund nor its advisor is an investment agent.
14-10908. Life insurance on settlor; liability of trustee
A trustee may acquire or retain a contract of life insurance on the life of the settlor or the settlor’s spouse, or both, without liability for a loss arising from the trustee’s failure to:
1. Determine whether the contract is or remains a proper investment.
2. Investigate the financial strength of the life insurance company.
3. Exercise nonforfeiture provisions available under the contract.
4. Diversify the contract.
14-10909. Application to existing trusts
A. This article applies to trusts existing on and created after July 20, 1996.
B. As applied to trusts existing on July 20, 1996, this article governs only decisions or actions occurring after that date.