Judged by the Moment, Not the Outcome
Investing always involves uncertainty. A trustee might follow every best practice available, consult advisors, diversify appropriately, and still see a downturn in part of the portfolio. This statute makes clear that the standard for evaluating a trustee's compliance is based on what was known and available at the time the decision was made.
Compliance with this article is determined in light of the facts and circumstances existing at the time of a trustee's decision or action and not by hindsight.
A.R.S. § 14-10905This protection matters for trustees who manage investments in good faith. It means a beneficiary cannot wait for a market decline and then claim the trustee did something wrong simply because an investment lost value. The question is always whether the trustee's process was reasonable when the decision was made.
Why This Matters for Trust Administration
Without this rule, trustees would face enormous pressure to avoid any investment that could possibly decline, which would make responsible portfolio management nearly impossible. The prudent investor rule expects trustees to balance risk and return across the entire portfolio. This statute reinforces that expectation by ensuring compliance is measured fairly.
For families appointing a trustee or serving as one, this is a reassuring safeguard. A trustee who documents their reasoning, follows a sound investment strategy, and acts in the beneficiaries' best interests is protected from claims that rely purely on hindsight.
