Uniform Prudent Investor Act (UPIA)
Candlefocus EditorUnder the UPIA, trustees must base investment decisions on their expertise, care and prudence. They are obligated to develop a suitable investment plan and investment strategy, implement it in a timely manner, monitor its performance, and regularly evaluate the investments and management strategies. The UPIA also encourages trustees to diversify investment portfolios, use modern portfolio theory, emphasize long-term goals over short-term gains and select investments with the total return as the primary goal.
The Uniform Prudent Investor Act (UPIA) also outlines the role of a trust professional and provides guidelines for fiduciaries on how to handle certain types of investments. Under the act, a fiduciary must obtain verified information on the type, value and performance of the investments, and must evaluate how the investments fit with the objectives laid out in the trust. The UPIA also outlines how trustees should respond to changes in the environment, including how to exercise reasonable care, skill and caution when making investment decisions.
In addition, the UPIA provides clauses that address trustee liability, which protects trustees from liability when they act in accordance with the UPIA’s provisions. The act also requires that trustees not be in a situation where there is a conflict of interests. In this situation, the trustee must take all reasonable efforts to eliminate or reduce the conflict.
The UPIA is the culmination of several decades of legal research and practice. In its application, the UPIA provides a modern standard for trustees to apply when making investment decisions on behalf of beneficiaries. It increases the level of responsibility of trustees and helps ensure that assets are managed judiciously and in the best interests of beneficiaries. Ultimately, the UPIA provides greater security for trust assets in the long-term.