A fiduciary (e.g., trustee, personal representative, etc.) has an obligation to invest and manage assets as a “prudent investor” would. When making investment and management decisions, the fiduciary should consider the purposes, terms, distribution requirements and other circumstances of the trust or fiduciary relationship. O’Riley v. US Bank, NA, 412 S.W.3d 400, 414 (Mo. Ct. App. 2013). The fiduciary is to use reasonable care, skill and caution. Investment decisions are evaluated in the context of an entire portfolio and as part of an overall investment strategy having risk and return objectives reasonably suited to the trust or estate. Id.
Courts have further announced a number of additional relevant facts when considering whether a fiduciary has prudently managed assets: (1) general economic conditions, (2) potential inflation or deflation, (3) tax consequences, (4) the role that each investment plays in the entire portfolio, (5) income and capital appreciation, (6) other known resources of the beneficiary(ies), (7) need for liquidity, income and capital appreciation, (8) assets of special value and (9) size of the portfolio and estimated duration of the fiduciary relationship.
These legal standards are quite gray and are often directly relevant in suits for breach of trust, trustee removal or other fiduciary litigation relating to mis-management of assets. Adding to the complexity is that compliance with these prudent investor standards is determined in light of the facts and circumstances existing at the time of the investment and management decisions, not in hindsight. Id. In providing these claims, it is usually necessary to have an expert prove and testify that the decisions were careless and/or imprudent at the time the course of action was taken.