DEFINITION of 'Authorized Investment'

Dictated by state laws or by trust instruments designed to restrict the kinds and amounts of investments allowed within a trust. In most cases, an authorized investment list prevents aggressive or speculative investments and insures that the trust is conservatively managed. It is the responsibility of the trustee, or fiduciary, to comply with the list of authorized investments for the trust account involved.

BREAKING DOWN 'Authorized Investment'

While many states have abolished what was known as the "legal list" of investments permitted in trusts, there are still general rules that govern a fiduciary's investment choices and the management of trust assets. These rules are governed both by states and by the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC), and are usually arbitrated in the surrogate or probate courts.

RELATED TERMS
  1. Active Trust

    A trust where the trustee is held accountable for additional ...
  2. Trust Company

    A legal entity that acts as fiduciary, agent or trustee on behalf ...
  3. Trust Property

    Assets that have been placed into a fiduciary relationship between ...
  4. Equity Unit Investment Trust

    A registered trust in which investors purchase units from a fixed ...
  5. Alimony Substitution Trust

    A trust agreement in which a divorced person agrees to pay spousal ...
  6. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended ...
Related Articles
  1. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  2. Financial Advisor

    Should You Put Your Faith In A Trust?

    Many institutions want a piece of your portfolio, but trusts can provide a one-stop shop.
  3. Financial Advisor

    Irrevocable Trusts: New Trends You Need to Know

    Several improvements and additional provisions have been added to irrevocable trusts in recent years making them considerably more versatile than before.
  4. Investing

    Unit Investment Trusts Market: 3 Trends in 2016

    Learn more about unit investment trusts (UITs), and discover some of the most common trends in the UIT market to date in the year 2016.
  5. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  6. Managing Wealth

    How to Set Up a Trust Fund in Canada

    You don't have to be rich to make use of a trust fund. Rules can be complex; here's what you'll need to discuss with your lawyer.
  7. Managing Wealth

    Surprising Ways a Trust Could Help Your Family

    Everything you always wanted to know about setting up trusts, in handy glossary form.
  8. Managing Wealth

    What's a Trust?

    A trust is a fiduciary relationship in which one party gives another party the right to hold property or assets on behalf of a beneficiary.
  9. Financial Advisor

    Advisors: Tips for When to Employ Living Trusts

    Revocable living trusts accomplish estate planning objectives that aren't possible with a will. Here are some of the cases that show when to use a trust.
  10. Investing

    A Look Into Creating a Trust Fund With ETFs (VCIT, SDIV)

    Learn the basics of how a trust works and the two most common types. Discover how to use ETFs to fund a trust and the different strategies.
RELATED FAQS
  1. What is the difference between a revocable trust and a living trust?

    Learn how a revocable trust and living trust are two terms used to describe the same thing and what the key provisions are ... Read Answer >>
Hot Definitions
  1. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  2. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  3. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  4. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Four Percent Rule

    A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule ...
Trading Center