§ 11-2.3 Prudent investor act\n (a) Prudent investor rule.\n A trustee has a duty to invest and manage property held in a fiduciary\ncapacity in accordance with the prudent investor standard defined by\nthis section, except as otherwise provided by the express terms and\nprovisions of a governing instrument within the limitations set forth by\nsection 11-1.7 of this chapter. This section shall apply to any\ninvestment made or held on or after January first, nineteen hundred\nninety-five by a trustee.\n (b) Prudent investor standard.\n (1) The prudent investor rule requires a standard of conduct, not\noutcome or performance. Compliance with the prudent investor rule is\ndetermined in light of facts and circumstances prevailing at the time of\nthe decision or action of a trustee. A trustee is not liable to a\nbeneficiary to the extent that the trustee acted in substantial\ncompliance with the prudent investor standard or in reasonable reliance\non the express terms and provisions of the governing instrument.\n (2) A trustee shall exercise reasonable care, skill and caution to\nmake and implement investment and management decisions as a prudent\ninvestor would for the entire portfolio, taking into account the\npurposes and terms and provisions of the governing instrument.\n (3) The prudent investor standard requires a trustee:\n (A) to pursue an overall investment strategy to enable the trustee to\nmake appropriate present and future distributions to or for the benefit\nof the beneficiaries under the governing instrument, in accordance with\nrisk and return objectives reasonably suited to the entire portfolio;\n (B) to consider, to the extent relevant to the decision or action, the\nsize of the portfolio, the nature and estimated duration of the\nfiduciary relationship, the liquidity and distribution requirements of\nthe governing instrument, general economic conditions, the possible\neffect of inflation or deflation, the expected tax consequences of\ninvestment decisions or strategies and of distributions of income and\nprincipal, the role that each investment or course of action plays\nwithin the overall portfolio, the expected total return of the portfolio\n(including both income and appreciation of capital), and the needs of\nbeneficiaries (to the extent reasonably known to the trustee) for\npresent and future distributions authorized or required by the governing\ninstrument;\n (C) to diversify assets unless the trustee reasonably determines that\nit is in the interests of the beneficiaries not to diversify, taking\ninto account the purposes and terms and provisions of the governing\ninstrument; and\n (D) within a reasonable time after the creation of the fiduciary\nrelationship, to determine whether to retain or dispose of initial\nassets.\n (4) The prudent investor standard authorizes a trustee:\n (A) to invest in any type of investment consistent with the\nrequirements of this paragraph, since no particular investment is\ninherently prudent or imprudent for purposes of the prudent investor\nstandard;\n (B) to consider related trusts, the income and resources of\nbeneficiaries to the extent reasonably known to the trustee, and also an\nasset's special relationship or value to some or all of the\nbeneficiaries if consistent with the trustee's duty of impartiality;\n (C) to delegate investment and management functions if consistent with\nthe duty to exercise skill, including special investment skills; and\n (D) to incur costs only to the extent they are appropriate and\nreasonable in relation to the purposes of the governing instrument, the\nassets held by the trustee and the skills of the trustee.\n (5) Trustee's power to adjust.\n (A) Where the rules in article 11-A apply to a trust and the terms of\nthe trust describe the amount that may or must be distributed to a\nbeneficiary by referring to the trust's income, the prudent investor\nstandard also authorizes the trustee to adjust between principal and\nin
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