PRUDENT INVESTOR RULE, MODERN PORTFOLIO THEORY, AND PRIVATE TRUSTS: DRAFTING AND ADMINISTRATION INCLUDING THE "GIVE-ME-FIVE" UNITRUST

The Prudent Investor Rule of the Restatement (Third) of Trusts and the Uniform Prudent Investor Act assess the soundness of trust investment in a fundamentally different way from the old prudent person rule. Among the advantages of these new concepts of prudence in trust investing are increased flexibility and recognition of the significance of modern portfolio theory. The changes in the law are outlined. A series of sample clauses that can be used to incorporate the new rules or avoid them are provided. Sample forms for new types of trusts are provided, including various types of private unitrusts. These new trusts have become desirable because the new prudent investor rule significantly reduces the distinction between income and principal.