2018 New York Laws
EPT - Estates, Powers and Trusts
Article 11 - Fiduciary: Powers, Duties and Limitations; Actions by or Against in Representative or Individual Capacities
Part 2 - Investments by Fiduciaries: Powers and Duties Relating Thereto
11-2.2 - Power to Invest
§ 11-2.2 Power to invest(a) Investment of trust funds
(1) A fiduciary holding funds for investment may invest the same in such securities as would be acquired by prudent men of discretion and intelligence in such matters who are seeking a reasonable income and preservation of their capital, provided, however, that nothing in this subparagraph shall limit the effect of any will, agreement, court order or other instrument creating or defining the investment powers of a fiduciary, or shall restrict the authority of a court of proper jurisdiction to instruct the fiduciary in the interpretation or administration of the express terms of any will, agreement or other instrument or in the administration of the property under the fiduciary's care. This paragraph shall apply to any investment, made on or after May first, nineteen hundred seventy, of funds held for investment by a fiduciary, and to all estates and trusts now in existence or which may hereafter come into existence.
A bank, trust company or paid professional investment advisor (whether or not registered under any federal securities or investment law) which serves as a fiduciary, and any other fiduciary representing that it has special investment skills shall exercise such diligence in investing the funds for which the fiduciary is responsible, as would customarily be exercised by prudent men of discretion and intelligence having special investment skills. This paragraph shall apply to any investment, made on or after January first, nineteen hundred eighty-six, of the funds held for investment by such a fiduciary and to all estates and trusts now in existence or which may hereafter come into existence.
This subparagraph shall not apply to any investment, made on or after January first, nineteen hundred ninety-five, of funds held for investment by a fiduciary, and to all estates and trusts in existence or which may come into existence on or after January first, nineteen hundred ninety-five.
(2) A trustee or other person holding trust funds may require such personal bonds or guaranties of payment of principal or interest or both, or such other bonds or guaranties, to accompany investments as may seem prudent, and may from time to time adjust, reduce, modify, postpone or compound the same, or any terms and conditions thereof, including the rate of interest, or any installments thereof, and may at any time release the same, and all premiums paid on such guaranties or fees for servicing mortgages may be charged to or paid out of income, provided that such charge or payment is not more than at the rate of one-half of one per centum per annum on the par value of such investments. But no trustee shall purchase securities hereunder from himself.
(3) Whenever a trustee or other person holding trust funds has heretofore lawfully invested or shall hereafter lawfully invest any trust funds in a share or part of a bond and mortgage or any part interest therein or shall hold any such share, part or part interest by apportionment, transfer, representation or otherwise, if the property subject to such mortgage is purchased pursuant to foreclosure sale or acquired by voluntary conveyance by or in behalf of such trustee or other person holding trust funds and another person, including another such trustee, owning another such share, part or part interest in such bond and mortgage, such trustee or other person holding trust funds or a person purchasing or acquiring title in behalf of such trustee may convey the undivided interest in such real property so purchased or acquired to a corporation, formed for the purpose of acquiring such property, in exchange for a proportionate part of the capital stock and the bonds, if any, of such corporation; provided that the other person, by or in whose behalf such property has been purchased or acquired, shall exchange his undivided interest in such property for a proportionate part of the capital stock and the bonds, if any, of such corporation, issued in exchange for such real property.
(4) The corporation formed, as provided in subparagraph (3), for the acquisition of such real property shall be a business corporation, and shall have all the powers of such a corporation, and its stockholders shall have the same power to vote to authorize or confirm any sale, mortgage, lease, option or other disposition of any or all of its property that is ordinarily possessed by shareholders of a business corporation; provided, however, that the certificate of incorporation shall prohibit it from investing in any stocks, bonds or other securities, which are not under the laws of this state a proper subject for the investment of trust funds, and shall provide that upon the sale of the real property acquired by the corporation such corporation shall be dissolved. Such dissolution shall be effectuated by proceedings under article 10 of the business corporation law to be taken promptly after such sale; provided, however, that if any such corporation shall sell real property held by it for a consideration consisting in whole or in part of evidences of indebtedness secured by mortgage upon such real property or shall reacquire such property upon foreclosure of such mortgage, in either of such events, such dissolution proceedings shall not be required to be taken until final liquidation in cash by the corporation of its entire interest in or lien upon such real property.
(5) Nothing contained in this section, however, shall affect any lawful investments in shares, parts or part interests in bonds and mortgages heretofore made by any trustee or other person holding trust funds for investment, nor affect any action heretofore taken in accordance with law with respect to such bonds and mortgages or shares, parts or part interests in such bonds and mortgages. Such trustee or other person holding trust funds for investment shall have all the powers heretofore possessed under this section or any other provision of law with respect to part interests in bonds and mortgages for the protection and preservation of the trust property. It is the intention of this section to prohibit any future investments in part interests in bonds, or notes, and mortgages for any estate or fund, for which such trustee or other person may hold funds for investment.
(6) A fiduciary holding funds for investment who is directed or authorized by an instrument creating the fiduciary relationship to retain the stock of a bank or trust company that is a member of a bank holding company currently fully registered under an act of Congress entitled "Bank Holding Company Act of l956", as the same may be amended from time to time, shall be considered as being directed or authorized to retain the stock of such bank holding company. Notwithstanding any contrary provision in this section, this subdivision shall apply to any fiduciary relationship now in existence or which may hereafter come into existence and to all investments now held or which may hereafter be acquired in such relationship.
(7) No fiduciary holding funds for investment shall be liable for any loss incurred with respect to any investment not eligible by law for the investment of trust funds, if such ineligible investment was received by such fiduciary pursuant to a decree of court or the terms of the will, deed, or other instrument creating the fiduciary relationship, or if such ineligible investment was eligible when received or when the investment was made by the fiduciary; provided such fiduciary exercises due care and prudence in the disposition or retention of any such ineligible investment.
(8) Investment by a fiduciary in a limited partnership or investment trust, as defined in 9-1.5 of this chapter, shall not be deemed to be an improper delegation of investment authority.
(9) As used in this paragraph, the phrase "person holding trust funds" and the terms "fiduciary" and "trustee" include a personal representative, trustee, guardian, a donee of a power during minority, committee of the property of an incompetent person, and conservator of the property of a conservatee.
(b) Rights of fiduciaries to invest in securities of investment companies.
(1) A fiduciary holding funds for investment may invest the same in securities of any management type investment company or trust registered pursuant to the federal investment company act of nineteen hundred forty, as amended, in any case in which a court order, the will, agreement or other instrument creating or defining the investment powers of the fiduciary authorizes the investment of such funds in either of the following: (A) Such investments as the fiduciary may, in his discretion, select. (B) Generally in investments other than those in which fiduciaries are by law authorized to invest trust funds, notwithstanding that the fiduciary or an affiliate of the fiduciary acts as investment advisor, custodian, transfer agent, registrar, sponsor, distributor, manager or provides other services to the investment company or trust. Unless the will, lifetime trust or order appointing the fiduciary provides otherwise, the fiduciary shall elect annually either (i) to receive or have its affiliate receive compensation for providing such services to such investment company or trust for the portion of the trust invested in such investment company or trust or (ii) to take annual corporate trustees' commissions with respect to such portion.
This subparagraph shall not apply to any investment, made on or after January first, nineteen hundred ninety-five, of funds held for investment by a fiduciary, and to all estates and trusts in existence or which may come into existence on or after January first, nineteen hundred ninety-five.
(1-a) In any case in which a court order, will, agreement or other instrument creating or defining the investment powers of the fiduciary directs, requires or authorizes that the funds held for investment be invested in United States government obligations, the fiduciary may invest such funds in securities of, or other interests in, any open-end or closed-end management type investment company or investment trust registered pursuant to the federal investment company act of nineteen hundred forty, as amended, provided that the portfolio of such investment company or investment trust is limited to United States government obligations or to repurchase agreements fully collateralized by such obligations and provided further that such investment company or investment trust shall take delivery of such collateral, either directly or through an authorized custodian.
(2) As used in this paragraph, the term "fiduciary" includes a personal representative, trustee, guardian, committee of the property of an incompetent and conservator of the property of a conservatee.
