Rule 119 - Investments by a Fiduciary(a) APPLICABILITY. This rule applies to all fiduciaries under the supervision of the court.(b) INVESTMENT STANDARDS. (1)Prudent Person Standard .(A)In General. When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing property for the benefit of another, a fiduciary must act with care, skill, prudence, and diligence under the circumstances then prevailing. The fiduciary must use the same care, skill, prudence, and diligence as a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, to attain the goals of the settlor as determined from the trust instrument or will, or the objectives of the ward as determined by the court.(B)Relevant Circumstances. The fiduciary must consider the following relevant circumstances, among others: (i) general economic conditions;(ii) the possible effect of inflation or deflation;(iii) the expected tax consequences of investment decisions or strategies;(iv) the role that each investment or course of action plays within the overall portfolio;(v) the expected total return from income and the appreciation of capital;(vi) other resources of the beneficiary, ward, or estate;(vii) needs for liquidity, regularity of income, or preservation or appreciation of capital; and(viii) an asset's special relationship or special value.(2)Acquiring or Retaining Property or Other Investments. Within the limitations of the foregoing and considering individual investments as part of an overall investment strategy, a fiduciary is authorized to acquire every kind of property, real, personal, or mixed, and every kind of investment. In the absence of express provisions to the contrary in any will or trust instrument, a fiduciary may without liability continue to hold property received into a trust or an estate at its inception or subsequently added to it or acquired pursuant to proper authority or previously held by the ward if and as long as the fiduciary, in the exercise of good faith and of reasonable prudence, discretion and intelligence, may consider that retention is in the best interests of the trust or the ward or probate estate or in furtherance of the goals of the settlor or testator as determined from any trust instrument or will or the objectives of the ward as determined by the court.(3)Deposit of Funds in Bank or Other Depository. In the absence of express provisions to the contrary in any trust instrument or will, a deposit of funds at interest in any bank or other depository (including the trustee) is a permissible investment to the extent that the deposit is insured under any present or future law of the United States, is collateralized pursuant to any present or future law of the District of Columbia or the United States, or to such greater extent as the court may authorize. Nothing in this rule may be construed as limiting the right of fiduciaries in proper cases to make deposits of moneys in banks, subject, in the case of interest-bearing deposits, to such notice or other conditions respecting withdrawal as may be prescribed by law or governmental regulation affecting such deposits.(4)Deviation from Terms of Trust or Will. Nothing in this rule abrogates or restricts the power of the court in proper cases to direct or permit the fiduciary to deviate from the terms of the trust or will regarding the making or retention of investments.(5)Other Terms Invoking Prudent Person Standard. Terms such as "investments permissible by law for investment of trust funds," "legal investments," "authorized investments," "investments acquired using the judgment and care which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital," and other words of similar import used in defining the powers of a fiduciary relative to investments, in the absence of other controlling or modifying provisions of a trust instrument or will, may be construed as authorizing any investment permitted, and imposing the standard of prudence required, by the terms of Rule 119(b)(1).(6)Property Defined. The term "property" as used in this rule includes life insurance, endowment, and annuity contracts issued by legal reserve companies.(c) EFFECT OF COURT AUTHORIZATION FOR INVESTMENT. In all cases in which a fiduciary is required to obtain court authorization prior to making investments, an order of court authorizing investments under this rule does not constitute court approval of the particular investments nor will the fiduciary be relieved of any fiduciary responsibility for having made the investments.Adopted by Order dated March 4, 2022, effective 8/22/2022.COMMENT
Subsection (b)(1) of this rule maintains "the prudent investor" standard as expressed in Johns v. Herbert, 2 App. D.C. 485(1894), but makes clear that a prudent investor uses a total asset management approach in light of the investment objectives for the beneficiary and allows the court to permit generally accepted practices of risk allocation embodied in modern portfolio management theory. For further explication of current fiduciary investment practices with respect to trusts, see D.C. Code §§ 191309.01 to -.06 (2012 Repl.).