March 12, 2019

Helping Trustees Avoid Liability – The Duty of Loyalty

The most important duty a trustee has is that of loyalty. The courts are particularly sensitive to this duty, and for good reason—the trust was created for the benefit of the beneficiaries. The duty of loyalty requires that a trustee administer the trust solely in the beneficiaries’ interests. Where trustees run afoul of the duty of loyalty is doing things they should not do.

Specifically, a trustee should:

  • Not place the trustee’s own interests above those of the beneficiaries.
  • Avoid all forms of self-dealing.
  • Not engage in transactions in which the trustee’s personal interests may conflict with those of the beneficiaries.
  • Not co-mingle trust funds with the trustee’s personal funds.
  • Not withdraw trust money for the trustee’s personal use.
  • Not use the property held in the trust, such as homes or vehicles, for personal use.
  • Not purchase or rent trust assets at below-market prices.

The courts will look at any actions that fail to follow these guidelines with severe skepticism. But a trustee can avoid the court’s wrath by simply asking before taking any action, “Does this help the beneficiaries?”

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The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

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