CHAPTER 80 SENATE BILL No. 503 An Act enacting the Kansas uniform prudent investor act; repealing K.S.A. 17-5004. Be it enacted by the Legislature of the State of Kansas:

      Section  1. (a) Except as otherwise provided in subsection (b), a fi-
duciary who invests and manages trust assets owes a duty to the benefi-
ciaries of the trust to comply with the prudent investor rule set forth in
this act.

      (b) The prudent investor rule, a default rule, may be expanded, re-
stricted, eliminated or otherwise altered by the provisions of a trust. A
fiduciary is not liable to a beneficiary to the extent that the fiduciary acted
in reasonable reliance on the provisions of the trust.

      (c) As used in this act, ``fiduciary'' means a personal representative
or a trustee. The term includes an executor, administrator, successor per-
sonal representative, special administrator, and a person performing sub-
stantially the same function.

      Sec.  2. (a) A fiduciary shall invest and manage trust assets as a pru-
dent investor would, by considering the purposes, terms, distribution
requirements and other circumstances of the trust. In satisfying this stan-
dard, the fiduciary shall exercise reasonable care, skill and caution.

      (b) A fiduciary's investment and management decisions respecting
individual assets must be evaluated not 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 fiduciary shall consider in investing
and managing trust assets are such of the following as 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 strat-
egies;

      (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, 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 who are eligible to receive
discretionary payments of trust income or principal assets;

      (7) needs for liquidity, regularity of income and preservation or ap-
preciation of capital; and

      (8) an asset's special relationship or special value, if any, to the pur-
poses of the trust or to one or more of the beneficiaries.

      (d) A fiduciary shall make a reasonable effort to verify facts relevant
to the investment and management of trust assets.

      (e) A fiduciary may invest in any kind of property or type of invest-
ment consistent with the standards of this act.

      (f) A fiduciary who has special skills or expertise or is placed in a
fiduciary capacity in reliance upon the fiduciary's representation that the
fiduciary has special skills or expertise, has a duty to use those special
skills or expertise.

      Sec.  3. A fiduciary shall diversify the investments of the trust unless
the fiduciary reasonably determines that, because of special circum-
stances, the purposes of the trust are better served without diversifying.

      Sec.  4. Within a reasonable time after entering into a fiduciary re-
lationship or receiving trust assets, a fiduciary shall review the trust assets
and make and implement decisions concerning the retention and dispo-
sition 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 act.

      Sec.  5. A fiduciary shall invest and manage the trust assets solely in
the interest of the beneficiaries.

      Sec.  6. If a trust has two or more beneficiaries, the fiduciary shall act
impartially in investing and managing the trust assets, taking into account
any differing interests of the beneficiaries.

      Sec.  7. In investing and managing trust assets, a fiduciary may only
incur costs that are appropriate and reasonable in relation to the assets,
the purposes of the trust and the skills of the fiduciary.

      Sec.  8. Compliance with the prudent investor rule is determined in
light of the fact and circumstances existing at the time of a fiduciary's
decision or action and not by hindsight.

      Sec.  9. (a) A fiduciary may delegate investment and management
functions that a prudent fiduciary of comparable skills could properly
delegate under the circumstances. For a fiduciary to properly delegate
investment functions under this subsection, the fiduciary shall:

      (1) Exercise reasonable care, skill and caution in selection of the in-
vestment agent, in establishing the scope and specific terms of any del-
egation and in periodically reviewing the investment agent's actions in
order to monitor overall performance and compliance with the scope and
specific terms of the delegation;

      (2) conduct an inquiry into the experience, performance history, er-
rors and omissions coverage, professional licensing or registration, if any,
and financial stability of the investment agent; and

      (3) if a trust, send written notice of such trust's intention to begin
delegating investment functions under this section to each beneficiary
eligible to receive income from the trust on the date of the initial dele-
gation at least 30 days before such delegation. This notice shall thereafter,
until or unless each beneficiary eligible to receive income from the trust
at the time are notified to the contrary, authorize the fiduciary to delegate
investment functions pursuant to this section.

      (b) In performing a delegated function, an investment agent shall be
subject to the same standards that are applicable to the fiduciary.

      (c) An investment agent shall be liable to each beneficiary of the trust
and to the designated fiduciary to the same extent as if the investment
agent were a designated fiduciary in relation to the exercise or nonexercise
of the investment function.

      (d) A fiduciary who complies with the requirements of subsection (a)
is not liable to the beneficiaries or to the trust for the decisions or actions
of the agent to whom the function was delegated.

      (e) By accepting the delegation of a trust function from the fiduciary
of a trust that is subject to the law of this state, an agent submits to the
jurisdiction of the courts of this state.

      Sec.  10. Conservators shall not invest funds under their control and
management in investments other than those specifically permitted by
K.S.A. 59-3019 and amendments thereto, except upon the entry of an
order of a court of competent jurisdiction, after a hearing on a verified
petition. Before authorizing any such investment, the court shall require
evidence of value and advisability of such purchase.

      Sec.  11. The following terms or comparable language in the provi-
sions of a trust, unless otherwise limited or modified, authorizes any in-
vestment or strategy permitted under this act: ``Investments permissible
by law for investment of trust funds,'' ``legal investments,'' ``authorized
investments,'' ``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,'' ``prudent
man rule,'' ``prudent trustee rule,'' ``prudent person rule'' and ``prudent
investor rule.''

      Sec.  12. This act applies to trusts existing on and created after the
effective date of this act. As applied to trusts existing on the effective date
of this act, this act governs only decisions or actions occurring after that
date.

      Sec.  13. This act shall be applied and construed to effectuate its gen-
eral purpose to make uniform the law with respect to the subject of this
act among the states enacting it.

      Sec.  14. This act may be cited as the Kansas uniform prudent inves-
tor act.

      Sec.  15. If any provision of this act or its application to any person
or circumstance is held invalid, the invalidity does not affect other pro-
visions or applications of this act which can be given effect without the
invalid provision or application, and to this end the provisions of this act
are severable.

      Sec.  16. K.S.A. 17-5004 is hereby repealed.

      Sec.  17. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 7, 2000.
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