Summary of Prudent Investor Rule

The successor trustee must invest the trust’s assets in accordance with Florida’s Prudent Investor Rule, Florida Statutes 518.11 and 518.112. The following is a summary of this law, which should be applied to the successor’s investment decisions based on the terms and conditions contained in the trust agreement.

• The successor trustee is required to invest and manage the trust’s assets as a prudent investor would.

• The successor trustee must review the trust’s existing assets within a reasonable time after becoming the successor trustee. The successor trustee then, as a prudent investor, must make decisions concerning the retention or disposition of the existing assets.

• The successor trustee is required to diversify the investments, unless the trustee believes it is not in the best interest of the beneficiaries. The successor trustee must pursue an investment strategy that includes both the production of income and the safety of capital considering the current and remainder beneficiaries of the trust.

• The successor trustee is required to develop an overall investment strategy, which incorporates both risk and return. This standard relates to the trust’s entire portfolio, not just to an individual investment held in the portfolio.

• The successor trustee’s decisions for the investment portfolio are to be judged based on the facts and circumstances existing at the time the decision was made. These factors would include inflation, tax consequences, economic conditions, expected total return, etc., while also considering that the successor trustee should only incur reasonable and appropriate costs.

• The Prudent Investor Rule is a test of conduct and not of the resulting performance of the investment portfolio.

• If the successor trustee has special skills and expertise in prudent investing, then he is required to use these skills for developing and monitoring the trust’s investment portfolio. Otherwise, the successor trustee should delegate his investment functions to an investment agent. The successor trustee has the duty to exercise reasonable care, skill and caution: (1) in the selection of the agent, (2) in the establishment and scope of specific terms of delegation, and (3) in the periodic review of the agent’s actions.

• If the successor trustee delegates the investment function, he is required to give written notice to the current beneficiaries within 30 days. If the successor trustee has followed this procedure, he is not responsible for the investment decisions or actions made by the investment agent.