Client Alert -9/25/23 - Investment of Trust Funds - New Option Requires Town Meeting Approval

With Town Meeting season upon us we would like to alert you to recent legislation that provides a new option for the investment of trust funds held by municipalities.

G.L. c. 44, § 54(a) authorizes municipalities to deposit trust funds in trust companies, co-operative banks, or savings banks, among other things, if not otherwise provided or directed by the donor of the funds. On August 9, 2023, the Governor approved Section 26 of Chapter 28 of the Acts of 2023 (the “Act”). That section inserted G.L. c. 44, § 54(b)(1), which provides:

A city, town or district that accepts this subsection in the manner provided in section 4 of chapter 4 [i.e., Town Meeting vote] may manage trust funds held in the custody of the treasurer of the city, town or district as a combined investment pool and may invest said funds in accordance with chapter 203C and not in accordance with subsection (a). If any provision of this subsection conflicts with the terms of a bequest, trust or other instrument that expresses the clear intent of the donor, then such funds may be managed and invested only in accordance with the terms of such bequest, trust or other instrument.

G.L. c. 203C, §§ 1-11 is the Massachusetts Prudent Investor Act. The new option to invest pursuant to the Prudent Investor Act provides trust commissioners with investment vehicles that potentially offer a better return on the funds, while maintaining acceptable risk from loss of principal.

A town seeking to take advantage of this new option to manage and invest trust funds must accept G.L. c. 44, § 54(b)(1) by Town Meeting vote.

Please contact us as further questions arise.

We are here to help.