Idaho Prudent Investor Rule for Trustees

Part of my Idaho Trusts Overview.

By Ronald W. Brilliant, Attorney at Law · Licensed in Idaho, Nevada & California · Last reviewed: September 2026 against the Idaho Code (Titles 15 and 68) as posted by the Idaho Legislature (July 1, 2026)

In This TopicIdaho TrustsTopic 5 of 14: Prudent Investor Rule

A trustee who invests and manages trust assets owes the beneficiaries a duty to follow the prudent investor rule (Idaho Code § 68-501(1)). The rule comes from the Idaho Uniform Prudent Investor Act, chapter 5 of Title 68 (Idaho Code § 68-513). It sets the standard for how trust money is invested, diversified, delegated, and judged after the fact.

This page matters to anyone serving as a trustee, to beneficiaries who want to understand how trust investments are measured, and to court-appointed guardians and conservators, who are also covered by the act (Idaho Code § 68-514). The general prudent person standard of care in Title 15 is explained on the trustee duties and liabilities page (Idaho Code § 15-7-302).

A Default Rule the Trust Can Change

The prudent investor rule is a default rule. That means it applies unless the trust says otherwise. The trust’s provisions may expand, restrict, eliminate, or otherwise alter the rule (Idaho Code § 68-501(2)).

A trustee is not liable to a beneficiary to the extent the trustee acted in reasonable reliance on the provisions of the trust (§ 68-501(2)). This is why the trust’s own investment provisions matter.

The Basic Standard of Care

A trustee must invest and manage trust assets as a prudent investor would. The trustee does this by considering the purposes, terms, distribution requirements, and other circumstances of the trust (Idaho Code § 68-502(1)). The trustee must exercise reasonable care, skill, and caution (§ 68-502(1)).

The Whole Portfolio Counts

Investment decisions about individual assets are not judged in isolation. They are evaluated in the context of the trust portfolio as a whole, as part of an overall investment strategy with risk and return objectives reasonably suited to the trust (Idaho Code § 68-502(2)).

Factors the Trustee Must Consider

In investing and managing trust assets, a trustee must consider the following circumstances, to the extent they are relevant to the trust or its beneficiaries (Idaho Code § 68-502(3)):

1. General economic conditions.
2. The possible effect of inflation or deflation.
3. The expected tax consequences of investment decisions or strategies.
4. The role each investment or course of action plays within the overall portfolio. The portfolio may include financial assets, interests in closely held enterprises (such as a family business), tangible and intangible personal property, and real property.
5. The expected total return from income and the appreciation of capital.
6. Other resources of the beneficiaries.
7. Needs for liquidity, regularity of income, and preservation or appreciation of capital.
8. An asset’s special relationship or special value, if any, to the purposes of the trust or to one or more beneficiaries.

Checking Facts, Types of Investments, and Special Skills

• A trustee must make a reasonable effort to verify facts relevant to investing and managing trust assets (Idaho Code § 68-502(4)).
• A trustee may invest in any kind of property or type of investment consistent with the standards of the act (§ 68-502(5)).
• A trustee who has special skills or expertise, or who was named trustee in reliance on the trustee’s representation of special skills or expertise, has a duty to use them (§ 68-502(6)).

Diversification

To diversify means to spread investments among different assets rather than concentrating them. A trustee must diversify the trust’s investments unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying (Idaho Code § 68-503).

Duties When a Trustee First Takes Over

Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee must review the trust assets (Idaho Code § 68-504). The trustee must then make and carry out decisions about keeping or disposing of assets. The goal is to bring the portfolio into compliance with the trust’s purposes, terms, distribution requirements, and other circumstances, and with the act (§ 68-504).

The act does not set a specific number of days. It says “within a reasonable time” (§ 68-504).

Loyalty, Impartiality, and Costs

Duty	What the statute requires	Idaho Code
Loyalty	Invest and manage trust assets solely in the interest of the beneficiaries	§ 68-505
Impartiality	If there are two or more beneficiaries, act impartially in investing and managing, taking into account their differing interests	§ 68-506
Investment costs	Incur only costs that are appropriate and reasonable in relation to the assets, the trust’s purposes, and the trustee’s skills	§ 68-507

Separate rules on how receipts and expenses are divided between trust income and principal are explained on the principal and income page.

No Hindsight

Whether a trustee complied with the prudent investor rule is judged by the facts and circumstances that existed when the trustee made the decision or took the action, “and not by hindsight” (Idaho Code § 68-508).

Delegating Investment Decisions to an Agent

A trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances (Idaho Code § 68-509(1)). The trustee must still use reasonable care, skill, and caution in (§ 68-509(1)(a)-(c)):

1. Selecting an agent.
2. Setting the scope and terms of the delegation, consistent with the purposes and terms of the trust.
3. Periodically reviewing the agent’s actions to monitor performance and compliance with the terms of the delegation.

An agent performing a delegated function owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation (§ 68-509(2)). A trustee who meets the three requirements above is not liable to the beneficiaries or the trust for the agent’s decisions or actions (§ 68-509(3)).

By accepting a delegation from the trustee of a trust subject to Idaho law, an agent submits to the jurisdiction of Idaho courts (§ 68-509(4)). Some trusts instead name an investment trust advisor; those rules are on the trust protectors, purpose trusts and dry trusts page.

Older Trust Language Now Means the Prudent Investor Rule

Many trust documents use older phrases to describe investment authority. Unless otherwise limited or modified, the following terms or comparable language in a trust authorize any investment or strategy permitted under the act (Idaho Code § 68-510):

• “investments permissible by law for investment of trust funds”
• “legal investments”
• “authorized investments”
• language about the judgment and care that persons of prudence, discretion, and intelligence exercise in managing their own affairs, not for speculation but for the permanent disposition of their funds
• “prudent man rule,” “prudent trustee rule,” “prudent person rule,” and “prudent investor rule”

Which Trusts and Fiduciaries Are Covered

The act applies to trusts existing on and created after its effective date. For trusts that already existed, it governs only decisions or actions occurring after that date (Idaho Code § 68-511).

The act also applies to and governs any bank, trust company, or individual authorized and duly appointed by a court of competent jurisdiction to act as a guardian or conservator under Idaho law (Idaho Code § 68-514).

Idaho’s “Legal Investments” Statutes

Chapter 4 of Title 68, titled “Legal Investments,” separately authorizes fiduciaries to make certain kinds of investments. These statutes list types of investments that fiduciaries such as executors, administrators, guardians, trustees, and other fiduciaries may lawfully make (Idaho Code §§ 68-401 through 68-407). Examples include:

• Real estate loans that the federal housing administrator insures or commits to insure (Idaho Code § 68-401), and notes or bonds secured by mortgages or deeds of trust insured by, or debentures issued by, the federal housing administrator, plus securities and stocks of national mortgage associations (Idaho Code § 68-402).
• Bonds and other obligations of, or guaranteed by, the United States, including through certain registered investment companies limited to such obligations, federal home loan bank bonds or debentures, and certain insured shares or accounts of savings and loan associations (Idaho Code § 68-404).
• For a bank or trust company acting as a fiduciary, securities of registered open-end or closed-end investment companies or investment trusts, even if the bank or an affiliate provides services to the fund for reasonable pay (Idaho Code § 68-404A).
• Certain housing authority bonds, though this does not relieve anyone of the duty to exercise reasonable care in selecting securities (Idaho Code § 68-405).
• Life, endowment, or annuity contracts from a legal reserve life insurance company authorized to do business in Idaho, when in the fiduciary’s opinion it will be for the best interests of the wards or trust estate. If a court order was previously required by law for the investment of the funds, that order is still required (Idaho Code § 68-406).
• Revenue bonds, warrants, general obligation bonds, or general obligation refunding bonds issued by any Idaho port district (Idaho Code § 68-407).

Recall that a trust provision authorizing “legal investments” authorizes any investment or strategy permitted under the prudent investor act, unless otherwise limited or modified (Idaho Code § 68-510).

How I Can Help

I help trustees understand what their trust documents and the Idaho Uniform Prudent Investor Act require, including reviewing assets when they first take over, documenting investment decisions, and setting the terms of a delegation to an investment agent. I also help beneficiaries evaluate whether a trustee’s investment choices met the statutory standard. Request a consultation to discuss your situation.

This page provides general information about Idaho trust law, based on the Idaho Code, and is not legal advice. Court rules and case law also affect these matters. Every situation is different; consult an attorney about yours. Reading this page does not create an attorney-client relationship.