Prudent Person Rule Law and Legal Definition

The prudent person rule generally refers to a legal maxim that symbolizes a standard that requires that a fiduciary entrusted with funds shall invest such funds in securities that any reasonable individual interested in receiving a good return of income while preserving his or her capital would purchase. It is also called reasonable man rule. Under this rule, a person need not possess exceptional investment skill but must exercise discretion and average intelligence while investing that would be considered as proper or sound.

Prudent person rule with regard to guardianship is that a guardian of the estate who acts for a ward must follow the standard laid out by the rule when s/he makes an investment on behalf of the ward.