Trustees, guardians, and other fiduciaries may invest trust funds in certain listed securities and in income-producing commercial or residential property, unless prohibited or the trust document says otherwise.
All trustees, guardians and other fiduciaries in this state, unless prohibited, or another mode of investment is prescribed by the will or deed of the testator or other person establishing the trust, may invest all funds in their hands in securities specified in §§ 35-3-103 — 35-3-111 , and may also invest funds in income-producing commercial or residential property. Acts 1931, ch. 100, § 1; C. Supp. 1950, § 9596.1; modified; T.C.A. (orig. ed.), § 35-302; Acts 2016, ch. 640, § 3. Amendments. The 2016 amendment added “, and may also invest funds in income-producing commercial or residential property.” at the end. Effective Dates. Acts 2016, ch. 640, § 4. March 23, 2016. Law Reviews. Non-Tax Aspects of Estate Planning (Ronald Lee Gilman), 2 Mem. St. U.L. Rev. 41 (1972). NOTES TO DECISIONS 1. Construction and Interpretation. 2. —Provisions Directory. 3. Construction with Other Acts. 4. —Uniform Veterans' Guardianship Act. 5. Investment of Trust Funds. 6. —Duty to Invest. 7. —Legalizing Unauthorized Investments. 8. —Mortgage. 9. —Loan by Guardian from Trust. 10. —Will Provisions — Effect. 11. —Rule of Prudence. 1. Construction and Interpretation. 2. —Provisions Directory. This chapter is not mandatory, but intended to authorize by specific reference thereto the investment of the trust funds in certain property or securities listed or named, and is therefore permissive. Falls v. Carruthers, 20 Tenn. App. 681, 103 S.W.2d 605, 1936 Tenn. App. LEXIS 59 (Tenn. Ct. App. 1936). 3. Construction with Other Acts. 4. —Uniform Veterans' Guardianship Act. This statute includes most securities which are safest and most desirable for investment of trust funds and the Uniform Veterans' Guardianship Act, prior to amendment of 1935, did not confer authority on guardian to invest ward's funds in other securities, without first obtaining the approval of court. McCuiston v. Haggard, 21 Tenn. App. 277, 109 S.W.2d 413, 1937 Tenn. App. LEXIS 32 (Tenn. Ct. App. 1937). 5. Investment of Trust Funds. 6. —Duty to Invest. Where trust money cannot be applied either immediately or within a short time to the purposes of the trust, it is the duty of the trustee to make the fund productive to the cestuis que trust by investment of it in some proper security. Linder v. Officer, 175 Tenn. 402, 135 S.W.2d 445, 1940 Tenn. LEXIS 74 (1940). 7. —Legalizing Unauthorized Investments. The rule that a trustee is not liable for loss on investment unauthorized at the time which it was made but which by subsequent events becomes a legal investment is only applicable where the depreciation occurs after the investment becomes legal. Humphries v. Manhattan Sav. Bank & Trust Co., 174 Tenn. 17, 122 S.W.2d 446, 1938 Tenn. LEXIS 58 (1938). 8. —Mortgage. Notwithstanding effect of statute conferring upon guardians authority to invest in existing real estate bonds and notes, the purchase of an existing mortgage constituted waste and was sufficient in itself to authorize removal of minor's guardian. Monteverde v. Christie, 23 Tenn. App. 514, 134 S.W.2d 905, 1939 Tenn. App. LEXIS 59 (Tenn. Ct. App. 1939). 9. —Loan by Guardian from Trust. If it could be conceded that this chapter may be given a curative effect, insofar as the illegality grounded on the investment of the ward's funds in an existing and outstanding mortgage loan is concerned, it can hardly be reasonably contended that anything in the chapter covers or cures the fundamental illegality of an investment of a ward's funds in a loan owned by the guardian — a purchase from itself. Meloy v. Nashville Trust Co., 177 Tenn. 340, 149 S.W.2d 73, 1940 Tenn. LEXIS 42 (1941). 10. —Will Provisions — Effect. A testamentary trustee's estate cannot be held liable for loss to the trust funds by the purchase of certain corporate stock with a portion of the trust funds, in view of provisions of the will creating the trust fund, empowering the trustee to make reinvestments of trust property “as he may see fit, looking always to the safety of the investment rather than to a high rate of interest.” Falls v. Carruthers, 20 Tenn. App. 681, 103 S.W.2d 605, 1936 Tenn. App. LEXIS 59 (Tenn. Ct. App. 1936). 11. —Rule of Prudence. Losses suffered by the trust corpus due to bad investments cannot be recovered from the trustee personally if he acted in good faith and as a prudent businessman would in the conduct of his own affairs even though the investments are other than permitted by statute since the statutory authorizations are permissive only. Falls v. Carruthers, 20 Tenn. App. 681, 103 S.W.2d 605, 1936 Tenn. App. LEXIS 59 (Tenn. Ct. App. 1936).