been at all guilty of negligence; otherwise he will not be charged with it. If he exercises the "common or ordinary diligence which men of common prudence generally exercise about their own affairs," he will not be charged. If it is possible under all the circumstances to secure interest on the checking account, that should be done. Interest will almost certainly be allowed by banks when the balances average $1,000 or more and will remain in the bank a month or more. No agreement, however, to allow the funds to remain a definite length of time should be entered into because of the liability which would devolve upon the executor therefrom. Generally, there is no better use for cash on hand than settling current demands upon the estate, although under prudent management such demands are not always paid at once. § 97. Investment of Money It is the duty of a trustee to invest moneys belonging to the trust. He must not let funds be idle. His duty in this respect differs from the duty devolving on an executor. If funds are likely to remain in his hands for any length of time, they should be invested in such manner as will insure reasonable security and a fair interest. A reasonable time is allowed a trustee within which to invest such funds as he has. After such reasonable time, he may be charged with interest; that is, he may be charged with such interest as might have accrued above the rate paid by the bank if the moneys had been invested in good securities. What will be considered a reasonable time, will, in each case, be determined by the facts, although in some states a period of from six to fifteen months is set within which time funds may be held and not invested, while in Virginia and West Virginia the money must be invested within thirty days after collection. Unless the bank was paying a fair rate on the invested balance, it would seem that six months was too long a period to let money lie idle, while it would not be profitable to invest money and pay brokerage if the money so invested was likely to be needed in a few months. The local usage should be ascertained. Such investing as he does, however, must be done in accordance with the statutes regulating trust fund investments. In practically every state, the following are considered valid as a trustee's purchase: 1. Public securities. United States bonds, and state, county, and municipal bonds of the state where the trust is created. 2. First mortgages on real property. The property must have clear title, be located in the state where the trust is to be administered, and the amount invested must not exceed 66 2/3 per cent of the appraised value. In some states (the statutes should, of course, be consulted at all times), selected securities of the following classes will also be considered good investments: 1. Municipal bonds 2. Corporate bonds 3. Corporate stock 4. Second mortgages 5. Securities of other states Where a trustee has purchased properly authorized stocks and bonds, etc., he cannot be held liable for any depreciation which may take place after such purchase unless he continues to hold falling stocks when a prudent business man would sell them. § 98. Disposing of Unauthorized Investments Practically the first thing for a personal representative to do is to collect the personal property belonging to the estate and, unless otherwise directed by will, to turn it into cash. If, in addition to the usual duties of executor, a trust fund is to be established and the executor is to be a trustee, it will be his duty to see that the investments made with the moneys realized are lawful trust fund investments. The testator or creator of a trust may give positive directions that a certain investment or certain classes of investments be retained or made. In such case the trustee may obey orders without incurring responsibility. Otherwise, in connection with the duty of collecting the estate, will also be the duty of selling any investments of the testator or creator of the trust that are not of the character prescribed for trust funds in the particular state. That is to say, by the provisions of the various state statutes, a trustee may invest or hold for trust only those securities which are approved of by the statutes. If therefore it happens that the bonds already owned by the testator do not come under the list of approved securities for the state, the trustee must get rid of them. If, however, some of the bonds are those approved by statute, the trustee may keep those and sell the remainder. It is to be remembered that the trustee is held to strict accountability because he is a trustee. A man might perhaps have his own funds invested to some extent in some industrial common stock that pays large dividends, but if he dies and leaves his property, including the profitable common stock, to trustees for the benefit of his wife and minor children, it would be the duty of the trustee to sell the profitable common stock forthwith and to invest the proceeds in the safe, interestyielding securities prescribed by law for trustees. In Massachusetts, Connecticut, New Jersey, Kentucky, Illinois, New Hampshire, and Delaware, the rule given above apparently does not apply, and in these states it is held that the trustee may continue to hold any investments already made by the creator of the trust regardless of the standard of such bonds. Where the beneficiaries of the trust are adults and capable of transacting business, they may authorize or acquiesce in the purchase of securities other than those permitted by the law by the trustee. In such case, the trustee will not be liable for any depreciation or losses which occur. The beneficiary, however, must have acted freely and deliberately and without influence from anyone. If it is otherwise, the acquiescence amounts to nothing, and the trustee is responsible for losses. In any such case the trustee for his own protection should not act without written authority. § 99. Authority to Retain or to Change Investments In many cases, testators and the creators of trustees explicitly relieve the trustee or the trustees from the restrictions as to investments that would otherwise apply. It could be done by a clause in some such form as this: And said trustees in investing the said funds shall not be restricted to what are known as "trust estate investments," but may in the exercise of their discretion buy such securities and make such investments as seem to them best. This would not authorize the trustees to buy oil stocks or invest in any other speculative ventures, but would justify them in buying such stocks and bonds as provident business men buy for their own investments. If they made such investments and the price went down, the trustees would not be held liable, provided they sold before the loss became excessive. § 100. General Rules A trustee should never lend the funds entrusted to him upon personal security only, no matter what the financial standing of the borrower is at the time of the loan. A trustee must purchase no real estate with the funds in his care, unless given the power to do so by the provisions of the instrument of trust. Even where this is authorized by the provisions of the trust, it is always well to have an order from the court permitting this. Where, however, property has been bought in at a foreclosure of a mortgage duly acquired as a trust investment, this property is considered as personal property and is accounted for as personal property. § 101. Business Ventures Where no authority to conduct a business has been granted by the court or by the provisions of the will or declaration of trust, a trustee must close out a business carried on by the testator within a reasonable time, and invest the money. Furthermore, a trustee must never invest the funds in any business or trade. The law considers this a mere speculation, and as such looks upon it with great disfavor. A trustee must never profit in any way from dealings with the trust estate. He may not buy at a sale of the trust property; and any purchase made with trust money, in the individual name of the trustee, is voidable at the will of the beneficiary. He is allowed all lawful commissions and a compensation for his services, and that is all the benefit that he may derive from the trust. REVIEW QUESTIONS 1. What is the general rule for a trustee as to the custody of the money or property of others? Why should he not mingle the estate funds with his own? What is he required to do in earning interest on idle funds? 2. What investments may a trustee make? Is there any extension of these rules in your state? If securities properly purchased and held should depreciate, what is the responsibility of the trustee? 3. If property left for a trust fund contains securities not authorized for trust investments in the state, what is the duty of the |