According to Merriam-Webster, prudent is defined as:
- marked by wisdom or judiciousness prudent advice
- shrewd in the management of practical affairs prudent investors
In the case of estate planning, estate administration, and trust administration, fiduciaries have a duty to prudently invest the assets under their management. Investment risks must be weighed against the potential rewards, taking into consideration things like investment timeframes, diversification strategies, the balance of investments, comfort level of the individual, fees, liquidity of assets, retirement timelines, etc.
Prudent investment is not a guarantee of financial success. However, the strategies implemented should reflect the best options available at the time of the investments – strategies that are unique for every individual’s unique financial goals. The Prudent Investor Rule is in place to ensure that the person handling your investments is making sensible decisions.
Who Handles Prudent Investment?
Unless you have extensive knowledge about investment strategies, you will want to hire a professional advisor to advise you on how to prudently invest. Prudent investment should be an ongoing process. Any investment portfolio should be continually monitored to ensure that the allocations are performing well. Likewise, if any of the diversifications are working against each other, steps should be taken to reassess the portfolio and make changes where necessary. This may include rebalancing percentages, selling / buying at opportune times, etc. The fiduciary should also be cognizant of ways to work around excessive fees for trades, purchases, etc.
The Denver trust administration lawyers at Brown & Crona, LLC can advise fiduciaries on prudently investing as part of trust administration. To learn more about prudent investment in Colorado, contact us at (303) 339-3750 or send us a message online to meet with our experts.