Brief ⁽¹⁾

SB 503, as amended, concerns the enactment of the Kansas Uniform Prudent Investor Act and the repeal of the existing law. Among other things, the bill provides that:

• A fiduciary owes a duty to the beneficiaries of a trust to comply with the prudent investor rule, and is not liable to the beneficiaries to the extent the fiduciary acted in reasonable reliance on the provision of the trust;



• A fiduciary is to manage the trust assets as an investor would, exercising reasonable care, skill, and caution (a fiduciary who claims special skills will be held accountable to the level of those skills);



• A fiduciary's investment decisions are to be evaluated in the context of the whole portfolio rather than upon each individual investment;



• A fiduciary may invest in any kind of property or type of investment consistent with the prudent investor rule, and is to diversify the investments unless the purposes of the trust are better served without diversification;



• A fiduciary is to invest and manage the trust assets solely in the interests of the beneficiaries;



• A fiduciary may delegate investment and management functions that a prudent fiduciary of comparable skills could properly delegate under the circumstances (the investment agent is liable to the beneficiaries and the fiduciary to the same extent as if the agent were a designated fiduciary and is subject to the courts of this state);



• A conservator may not invest funds in investments other than those permitted in Kansas law governing conservator's rights and duties without court authorization; and



• The act applies to trusts existing on and created after the effective date of the act, July 1, 2000.

House Committee amendments require that fiduciaries "should" rather than "shall" consider the circumstances listed in the bill in investing and managing trust assets; clarify that the fiduciary consider other resources only of the beneficiaries who are eligible to receive discretionary payments of trust income or principal assets; and, relating to the delegation of investment functions, the fiduciary is to consider in its inquiry of the investment agent, whether the agent has errors and omissions coverage.

The Senate Committee amendments replace the word "trustee" with the word "fiduciary" throughout; adds to the act certain provisions existing in Kansas law regarding the manner in which a fiduciary may delegate to an agent; and maintains current Kansas law on conservators which are not mentioned specifically in the Uniform Act.

Background

SB 503 was requested to be introduced by Senator Tim Emert, a member of the National Conference of Commissioners on Uniform State Laws, for consideration by the Legislature. Support for the bill came from members of the Butler County Community College Foundation Board of Trustees, and the Commerce Bank of Wichita.

While opposed to the bill as originally drafted, the Kansas Bar Association, the Kansas Trial Lawyers Association, and the Kansas Bankers Association Trust Division support the bill as amended.

The House Committee amendments were proposed by the Kansas Bar Association, the Kansas Bankers Association, and the Kansas Trial Lawyers Association.

The fiscal note prepared by the Division of the Budget indicates passage of the bill will have no fiscal effect.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/bill_search.html