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Trustees as investment managers: Its not whether you win or lose, it's how you play the game

February 27, 2020, by Daniel McGowan, on New Probate & Trust Cases |

In 1830 Massachusetts supreme Judicial Court Justice Samuel Putnam rendered a decision in Harvard College v. Amory (1830) 26 Mass (9 Pick) 446, establishing the "Prudent Man Rule" which would influence ethical standards for money management and the investment philosophy of fiduciaries in America for subsequent generations.  

Under the Ohio Trust Code, a Trustee's duty ot Comply with the Prudent Investor Act applies to any type of trust.  The trustee of an Ohio Trust, must comply with the Prudent Investor Act unless the Trust Instrument dictates otherwise.  A Trustee is not liable if the Trustee "acted in reasonable reliance on the provisions of the Trust."  

The Trustee must weigh all aspects of the Trust Instrument, such as distribution provisions, with the facts related to investment and management.

The Trustee must consider the economic climate, inflation and deflation, tax effects, how each investment relates to the whole, anticipated return, the Beneficiaries and the income and principal as it relates to the provisions of the Trust.  

Importantly, the Ohio Trust Code and the Prudent Investor Act provide the Trustees may delegate investment and management to an agent and may rely on that agent to comply without liability to the Beneficiaries.