Common Phrases That Activate the Standard
Trust documents drafted over different decades use different language to describe what a trustee can invest in. This statute provides a clear list of terms that, when they appear in a trust, automatically invoke the prudent investor rule. The trustee does not need to guess whether the rule applies.
The following terms or comparable language in the provisions of a trust, unless otherwise limited or modified, authorizes any investment or strategy permitted under this article: 1. Investments permissible by law for investment of trust funds. 2. Legal investments. 3. Authorized investments.
A.R.S. § 14-10906(1)-(3)Other recognized phrases include "prudent man rule," "prudent trustee rule," "prudent person rule," and "prudent investor rule." Even older language referencing "the judgment and care under the circumstances then prevailing that persons of prudence, discretion and intelligence exercise" triggers this standard.
What This Means for Older Trust Documents
Many trusts created years ago include investment language that predates Arizona's current prudent investor framework. This statute ensures those trusts are not stuck with outdated investment restrictions. If the trust uses any of the recognized phrases, the trustee has authority to follow modern portfolio theory and diversification strategies.
This is particularly relevant for families reviewing trusts drafted in the 1980s or 1990s. Even if the original language sounds conservative, the statute treats it as an invitation to use the full range of prudent investment strategies available today, unless the trust explicitly says otherwise.
