Re: Pertinent Law
Kyle.esq wrote:Who is a prudent inverstor and a trustee; in reference to this law.
Negligence is a civil tort. The essential elements for a claim of negligence are 1) duty, 2) breach of duty, 3) causation, and 4) damages.
A trustee has a
duty to manage the trust assets for the benefit of the beneficiaries. A trustee may invest the trust assets in order to achieve a return on investment. If the trustee makes a "bad" investment and the trust sustains a loss, the question often arises whether the trustee was negligent (breached his duty -- violated the standard of care / mismanaged the trust causing the loss) and therefore personally liable for the loss (and all other damages flowing from the negligence).
A "prudent investor" is basically a hypothetical person against whom an actual trustee's conduct will be measured. A reasonably prudent investor standard is an objective standard of care that asks the question: What would a reasonably prudent investor do under the same or similar circumstances. Some states have codified "prudent investor" standards.
The law will use the objective "prudent investor" (hypothetical person) standard to determine whether a trustee has met his/her standard of care when handling the assets of a particular trust. Failure to meet the objective standard of is a breach of duty. If that breach of duty causes losses -- damages -- then the plaintiff (the beneficiary of the trust) has established all elements of the negligence claim.