Trusts and Estates

Ca. Trs. & Estates Quarterly Volume 10, Issue 2, Summer 2004


By Adam F. Streisand*


California’s adoption of the Uniform Prudent Investor Act and the Uniform Principal and Income Act (the "UPIAs") liberated trustees from slavish adherence to inflexible investment rules and management decisions as well as rigid adherence to allocating receipts and disbursements. Trustees now have greater flexibility to invest for total return in accordance with modern portfolio theory, rather than focusing on assets in isolation or applying strict rules on adjusting principal to income. Greater flexibility, however, translates into more opportunities for beneficiaries to second-guess trustees who exercise their newfound discretion.

Since California’s adoption of the UPIAs, trusts and estates lawyers have seen the rise of a new type of "PI lawyer." Like a "personal injury" attorney, the new "prudent investor" or "principal and income" lawyer knows that a case with subjective standards has value. When a case involves the exercise of discretion and the vagaries of investment strategy, the court’s analysis and decision necessarily involves some subjectivity. The PI lawyer likes those odds, especially if he or she can find a conflict or a little bias or hostility to throw into the mix.

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