Permissible Investments By A Representative

  • Robert S. Thomas,
  •   Estate Planning, Probate
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Permissible Investments by a Representative

An executor or administrator of an estate plays a critical role and wears many hats when an estate goes through probate. One of these roles is a fiduciary duty to oversee the decedent’s property in a reasonable and responsible manner. This includes deciding where to invest the decedent’s money during probate.

A decedent’s will may specify the types of investments that a representative can make. This is sound estate planning and provides critical direction for the representative to follow. In addition, the Probate Act gives the representative limited discretion to “invest money of the estate of a decedent in any one or more” of the following investments:

  1. Fully guaranteed U.S. bonds or instruments that have a maximum maturity date of five years.
  2. Local obligations from a public agency or housing agency with a maximum maturity of 18 months.
  3. Savings accounts or certificates of deposit (COD’s) from state or national banks covered by the FDIC.
  4. COD’s, withdrawable capital accounts, deposits, and certificates from state or federal savings and loans institutions.
  5. A common trust fund administered in accordance with the Common Trust Fund Act, in which the investment meets the “prudent investment rule.”
  6. An investment in an “open-end registered investment company registered under the federal Investment Company Act of 1940”. This portfolio must be comprised of the aforementioned securities and investments that a representative has discretion to invest in. This investment company must comport with specific guidelines regarding collateral and interest rate speculation.
  7. Investments that have been authorized by the court.
  8. An open-end or closed end mutual fund that complies with the Investment Company Act of 1940. This includes mutual funds that receive services or pays fees to the representative; however, this investment must still meet the prudent investor rule.

As you can tell from this list, a representative’s discretion is generally limited to low-risk investments, as to reduce the chances that an irresponsible or unlucky representative can deplete the estate through bad financial choices. However, there is considerably more discretion for a professional financial representative provided they follow the prudent investor rule.

Call Robert S. Thomas, An Experienced Tax Attorney

If you are serving as a representative in probate, you have a vital job ahead of you. If you want smart, legal guidance, contact me. With over twenty years of legal experience in probate law, I can walk you through the many duties and complexities of your role so that you can honor the decedent’s wishes. Call the Law Offices of Robert S. Thomas at 847-392-5893 to schedule a consultation or visit our website today.

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