(4) This standard is more stringent than the previously used prudent person rule
, which required a trustee to invest funds as a person of prudence, with discretion, care, and intelligence.
Specifically, ERISA requires a plan's fiduciary to "act with the care, prudence, skill and diligence that a prudent person acting in like capacity under similar circumstances would act" -- also known as the "prudent person rule
Under the Uniform Prudent Investor Act of 1994, the prudent investor rule replaced the prudent person rule
(the prudent person rule
is also known as the prudent man rule).
However, other strategies such as appropriately applying the prudent person rule
could still be used, though taxpayers should note the increasing difficulty of challenging the proposed regulations when they are finalized.
Investment duties of trustees were defined by the Prudent Person Rule
. Under the Prudent Person Rule
the trustee had a duty "to make such investments and only such investments as a prudent man would make of his own property having in view the preservation of the estate and the amount and regularity of the income to be derived." (Emphasis added)
The duty of care is often referred to as the prudent person rule
because directors and officers are expected to act with the care of a reasonably prudent person in a similar position under like circumstances.