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Text: HSB00680                          Text: HSB00682
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House Study Bill 681

Conference Committee Text

PAG LIN
  1  1    Section 1.  Section 633.123, subsection 1, Code 1995, is
  1  2 amended to read as follows:
  1  3    1.  INVESTMENTS BY FIDUCIARIES.  When investing,
  1  4 reinvesting, purchasing, acquiring, exchanging, selling, and
  1  5 managing property for the benefit of another, a fiduciary
  1  6 shall exercise the care, skill, prudence, and diligence under
  1  7 the circumstances then prevailing that a prudent person acting
  1  8 in a like capacity and familiar with such matters would use to
  1  9 attain the purposes of the account pursuant to chapter 636A.
  1 10 This standard requires that when making investment decisions,
  1 11 a fiduciary shall consider the role that the investment plays
  1 12 within the account's portfolio of assets and may consider the
  1 13 general economic conditions, the anticipated tax consequences
  1 14 of the investment, the anticipated duration of the account,
  1 15 and the needs of all beneficiaries of the account.
  1 16    The propriety of an investment decision is to be determined
  1 17 by what the fiduciary knew or should have known at the time of
  1 18 the decision about the inherent nature and expected
  1 19 performance of the investment, the attributes of the account
  1 20 portfolio, the general economy, and the needs and objectives
  1 21 of the beneficiaries of the account as they existed at the
  1 22 time of the investment decision.
  1 23    Sec. 2.  Section 636.23, unnumbered paragraph 1, Code 1995,
  1 24 is amended to read as follows:
  1 25    All proposed investments of trust funds by fiduciaries
  1 26 shall first be reported to the court or a judge for approval
  1 27 and be approved and unless otherwise authorized or directed by
  1 28 the court under authority of which the fiduciary acts, or by
  1 29 the will, trust agreement, or other document which is the
  1 30 source of authority, a trustee, executor, administrator, or
  1 31 guardian shall invest all moneys received by such fiduciary,
  1 32 to be by the fiduciary invested, in securities which at the
  1 33 time of the purchase thereof are included in one or more of
  1 34 the following classes: pursuant to chapter 636A.
  1 35    Sec. 3.  Section 636.23, subsections 1 through 16, Code
  2  1 1995, are amended by striking the subsections.
  2  2    Sec. 4.  Section 636.24, Code 1995, is amended to read as
  2  3 follows:
  2  4    636.24  POPULATION AND INDEBTEDNESS.
  2  5    The population specified in section 636.23 shall be
  2  6 determined by the last preceding official federal census.  The
  2  7 indebtedness of any municipality or governmental subdivision
  2  8 shall be determined by the official certificate of the officer
  2  9 of such municipality or district in charge of its public
  2 10 accounts.
  2 11    Sec. 5.  Section 636.25, Code 1995, is amended to read as
  2 12 follows:
  2 13    636.25  EXISTING INVESTMENTS.
  2 14    Any fiduciary not governed by the probate code may by and
  2 15 with the consent of the court having jurisdiction over such
  2 16 fiduciary or under permission of the instrument creating the
  2 17 trust, continue to hold any investment originally received by
  2 18 the fiduciary under the trust or any increase thereof.  Such
  2 19 fiduciary may also make investments which the fiduciary may
  2 20 deem necessary to protect and safeguard investments already
  2 21 made according to the provisions of this and sections 636.23
  2 22 and 636.24 chapter 636A.
  2 23    Sec. 6.  Section 636.60, Code 1995, is amended to read as
  2 24 follows:
  2 25    636.60  POWERS AND DUTIES OF TRUSTEES NOT SUBJECT TO COURT
  2 26 ADMINISTRATION.
  2 27    Trustees of trusts not being administered in the probate
  2 28 court, shall have all the powers and shall be subject to all
  2 29 the duties and liabilities as provided in the probate code,
  2 30 except the duty of reporting to or obtaining approval of the
  2 31 court, and shall be authorized to make investments pursuant to
  2 32 chapter 636A.
  2 33    Sec. 7.  NEW SECTION.  636A.1  TITLE.
  2 34    This chapter may be cited as the "Iowa Uniform Prudent
  2 35 Investor Act".
  3  1    Sec. 8.  NEW SECTION.  636A.2  PRUDENT INVESTOR RULE.
  3  2    1.  Except as otherwise provided in this section, a trustee
  3  3 who invests and manages trust assets owes a duty to the
  3  4 beneficiaries of the trust to comply with the prudent investor
  3  5 rule as set forth in this chapter.
  3  6    2.  The prudent investor rule may be expanded, restricted,
  3  7 eliminated, or otherwise altered by the provisions of a trust.
  3  8 A trustee is not liable to a beneficiary to the extent that
  3  9 the trustee acted in reasonable reliance on the provisions of
  3 10 the trust.
  3 11    Sec. 9.  NEW SECTION.  636A.3  STANDARD OF CARE –
  3 12 PORTFOLIO STRATEGY – RISK AND RETURN OBJECTIVES.
  3 13    1.  A trustee shall invest and manage trust assets as a
  3 14 prudent investor would, by considering the purposes, terms,
  3 15 distribution requirements, and other circumstances of the
  3 16 trust.  In satisfying this standard, the trustee shall
  3 17 exercise reasonable care, skill, and caution.
  3 18    2.  A trustee's investment and management decisions
  3 19 respecting individual assets must be evaluated not in
  3 20 isolation but in the context of the trust portfolio as a whole
  3 21 and as a part of an overall investment strategy having risk
  3 22 and return objectives reasonably suited to the trust.
  3 23    3.  A trustee shall consider the following circumstances,
  3 24 to the extent they are relevant to the trust or its
  3 25 beneficiaries, in investing and managing trust assets:
  3 26    a.  General economic conditions.
  3 27    b.  The possible effect of inflation or deflation.
  3 28    c.  The expected tax consequences of investment decisions
  3 29 or strategies.
  3 30    d.  The role that each investment or course of action plays
  3 31 within the overall trust portfolio, which may include
  3 32 financial assets, interests in closely held enterprises,
  3 33 tangible and intangible personal property, and real property.
  3 34    e.  The expected total return from income and the
  3 35 appreciation of capital.
  4  1    f.  Other resources of the beneficiaries.
  4  2    g.  The trust's needs for liquidity, regularity of income,
  4  3 and preservation or appreciation of capital.
  4  4    h.  An asset's special relationship or special value, if
  4  5 any, to the purposes of the trust or to one or more of the
  4  6 beneficiaries.
  4  7    4.  A trustee shall make a reasonable effort to verify
  4  8 facts relevant to the investment and management of trust
  4  9 assets.
  4 10    5.  A trustee may invest in any kind of property or type of
  4 11 investment consistent with the standards of this chapter.
  4 12    6.  A trustee who has special skills or expertise, or is
  4 13 named trustee in reliance upon the trustee's representation
  4 14 that the trustee has special skills or expertise, has a duty
  4 15 to use those special skills or expertise.
  4 16    Sec. 10.  NEW SECTION.  636A.4  DIVERSIFICATION.
  4 17    A trustee shall diversify the investments of the trust
  4 18 unless the trustee reasonably determines that, because of
  4 19 special circumstances, the purposes of the trust are better
  4 20 served without diversifying.
  4 21    Sec. 11.  NEW SECTION.  636A.5  DUTIES AT INCEPTION OF
  4 22 TRUSTEESHIP.
  4 23    Within a reasonable time after accepting a trusteeship or
  4 24 receiving trust assets, a trustee shall review the trust
  4 25 assets and make and implement decisions concerning the
  4 26 retention and disposition of assets, in order to bring the
  4 27 trust portfolio into compliance with the purposes, terms,
  4 28 distribution requirements, and other circumstances of the
  4 29 trust, and with the requirements of this chapter.
  4 30    Sec. 12.  NEW SECTION.  636A.6  LOYALTY.
  4 31    A trustee shall invest and manage the trust assets solely
  4 32 in the interest of the beneficiaries.
  4 33    Sec. 13.  NEW SECTION.  636A.7  IMPARTIALITY.
  4 34    If a trust has two or more beneficiaries, the trustee shall
  4 35 act impartially in investing and managing the trust assets,
  5  1 taking into account any differing interests of the
  5  2 beneficiaries.
  5  3    Sec. 14.  NEW SECTION.  636A.8  INVESTMENT COSTS.
  5  4    In investing and managing trust assets, a trustee shall
  5  5 only incur costs that are appropriate and reasonable in
  5  6 relation to the assets, the purposes of the trust, and the
  5  7 skills of the trustee.
  5  8    Sec. 15.  NEW SECTION.  636A.9  REVIEWING COMPLIANCE.
  5  9    Compliance with the prudent investor rule is determined in
  5 10 light of the facts and circumstances existing at the time of a
  5 11 trustee's decision or action and not by hindsight.
  5 12    Sec. 16.  NEW SECTION.  636A.10  DELEGATION OF INVESTMENT
  5 13 AND MANAGEMENT FUNCTIONS.
  5 14    1.  A trustee may delegate investment and management
  5 15 functions that a prudent trustee of comparable skills would
  5 16 properly delegate under the circumstances.  The trustee shall
  5 17 exercise reasonable care, skill, and caution in the following:
  5 18    a.  Selecting an agent.
  5 19    b.  Establishing the scope and terms of the delegation,
  5 20 consistent with the purposes and terms of the trust.
  5 21    c.  Periodically reviewing the agent's actions in order to
  5 22 monitor the agent's performance and compliance with the terms
  5 23 of the delegation.
  5 24    2.  In performing a delegated function, an agent owes a
  5 25 duty to the trust to exercise reasonable care to comply with
  5 26 the terms of the delegation.
  5 27    3.  A trustee who complies with the requirements of
  5 28 subsection 1 is not liable to the beneficiaries or to the
  5 29 trust for the decisions or actions of the agent to whom the
  5 30 function was delegated.
  5 31    4.  An agent who accepts the delegation of a trust function
  5 32 from the trustee of a trust that is subject to the law of this
  5 33 state submits to the jurisdiction of the courts of this state.
  5 34    Sec. 17.  NEW SECTION.  636A.11  TRUST LANGUAGE INVOKING
  5 35 STANDARD OF THIS CHAPTER.
  6  1    The following terms or comparable language in the
  6  2 provisions of a trust, unless otherwise limited or modified,
  6  3 authorize any investment or strategy permitted under this
  6  4 chapter:
  6  5    1.  Investments permissible by law for investment of trust
  6  6 funds.
  6  7    2.  Legal investments.
  6  8    3.  Authorized investments.
  6  9    4.  Using the judgment and care under the circumstances
  6 10 then prevailing that persons of prudence, discretion, and
  6 11 intelligence exercise in the management of their own affairs,
  6 12 not in regard to speculation but in regard to the permanent
  6 13 disposition of their funds, considering the probable income as
  6 14 well as the probable safety of their capital.
  6 15    5.  The prudent man, trustee, person, or investor rule.
  6 16    Sec. 18.  NEW SECTION.  636A.12  APPLICATION TO EXISTING
  6 17 TRUSTS.
  6 18    This chapter applies to trusts existing on or created after
  6 19 July 1, 1996.  As applied to trusts existing on July 1, 1996,
  6 20 this chapter governs only decisions or actions occurring after
  6 21 that date.
  6 22    Sec. 19.  NEW SECTION.  636A.13  UNIFORMITY OF APPLICATION
  6 23 AND CONSTRUCTION.
  6 24    This chapter shall be applied and construed to effectuate
  6 25 its general purpose to make uniform the law with respect to
  6 26 the subject of this chapter among the states enacting the
  6 27 uniform prudent investor Act.
  6 28    Sec. 20.  NEW SECTION.  636A.14  SEVERABILITY.
  6 29    If any provision of this chapter or its application to any
  6 30 person or circumstance is held invalid, the invalidity does
  6 31 not affect other provisions or applications of this chapter
  6 32 which can be given effect without the invalid provision or
  6 33 application, and to this end the provisions of this chapter
  6 34 are severable.  
  6 35                           EXPLANATION
  7  1    This bill adopts the Uniform Prudent Investor Act approved
  7  2 and recommended by the national conference of commissioners on
  7  3 uniform state laws by establishing the Iowa Uniform Prudent
  7  4 Investor Act.
  7  5    The uniform Act provides that a trustee shall invest and
  7  6 manage trust assets based on a prudent investor standard.  The
  7  7 bill directs the trustee to view investments based on the
  7  8 total portfolio, and not on individual investments.  The bill
  7  9 provides for a trustee's standard of care, portfolio strategy,
  7 10 risk and return objectives, and duties of diversification,
  7 11 loyalty and impartiality.  The bill permits a trustee to
  7 12 delegate investment and management functions.  The bill
  7 13 provides that the uniform Act applies to trusts created after
  7 14 July 1, 1996, and to actions on previously existing trusts
  7 15 after that date.
  7 16    The bill eliminates the list of authorized securities a
  7 17 fiduciary is allowed to invest in under section 636.23 and
  7 18 provides that a fiduciary can invest pursuant to the prudent
  7 19 investor rule as provided by the uniform Act.  This change
  7 20 permits investments pursuant to the prudent investor rule for
  7 21 trusts subject to the probate code, memorial buildings and
  7 22 monument commissions, levee and drainage districts, and
  7 23 cemetery funds as provided in chapter 566.  
  7 24 LSB 3277XL 76
  7 25 ec/sc/14
     

Text: HSB00680                          Text: HSB00682
Text: HSB00600 - HSB00699               Text: HSB Index
Bills and Amendments: General Index     Bill History: General Index

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