Podcast
Questions and Answers
What are the three considerations under the prudent person standard with respect to one's own property?
What are the three considerations under the prudent person standard with respect to one's own property?
- Safety of the investment, current market trends, liquidity of assets
- Regulatory compliance, historical performance, diversification
- Safety of the investment, potential for appreciation, expected income generation (correct)
- Personal interest in investment, tax implications, future market value
How does the prudent person standard differ when it concerns another's property?
How does the prudent person standard differ when it concerns another's property?
- Requires more care because the fiduciary is responsible for someone else's asset. (correct)
- Standard remains the same regardless of property ownership.
- Focuses solely on the expected market value.
- Less care is required since the owner assumes the risk.
What is the guiding principle of the Uniform Prudent Investor Act?
What is the guiding principle of the Uniform Prudent Investor Act?
- Budgeting for future expenses is given more importance than current investments.
- Total asset management focuses on the performance of the entire trust portfolio. (correct)
- Individual asset performance is prioritized over overall portfolio management.
- Investments should only be made in low-risk options.
Under the prudent investor standard, which factor is least considered important?
Under the prudent investor standard, which factor is least considered important?
Flashcards
Prudent Person Standard (Pre-2004)
Prudent Person Standard (Pre-2004)
Investment decisions based on safety, potential appreciation, and expected income of the investment.
Prudent Person Standard (Another's Property)
Prudent Person Standard (Another's Property)
Higher standard than for one's own property, requiring more careful consideration from the investor.
Prudent Investor Standard
Prudent Investor Standard
Majority rule standard, especially for a trust portfolio, using the entire trust's assets for decision-making.
Uniform Prudent Investor Act
Uniform Prudent Investor Act
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Investment Appropriateness (Trust Portfolio)
Investment Appropriateness (Trust Portfolio)
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Study Notes
Prudent Standards of Care
- Common Law (Pre-2004): Texas (and likely other jurisdictions) previously used a "prudent person" standard.
- Prudent Person Standard Considerations: Safety of investment; potential appreciation in value; expected income generation.
- Heightened Standard for Another's Property: More care is demanded when managing someone else's assets.
- Prudent Investor Standard (Majority Rule): The Uniform Prudent Investor Act, enacted in Texas by 2004, is the modern approach.
- Total Asset Management: Investment appropriateness is judged in light of the entire trust's portfolio performance.
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