Lessons for Trustees and Beneficiaries Part IV- Fiduciary Duties

Fiduciary duties are duties owed by a Trustee to the Beneficiaries of a Trust.  One of those duties is the duty of Impartiality.  Impartiality means that if a Trust has two or more beneficiaries, the Trustee has a duty to treat all beneficiaries fairly.  Fairly does not necessarily mean equally; It all depends on the terms of the Trust.  The terms of a Trust can state that one beneficiary should be favored over another.  For example, when the beneficiaries of a Trust are a spouse and children, the spouse is often favored during her lifetime.  If that is the case, then the Trustee must follow the terms of the Trust and favor the spouse during her lifetime.  The takeaway is that all beneficiaries must be treated fairly within the terms of the Trust.   

Another fiduciary duty is the duty of loyalty.  A Trustee must put the interests of the Beneficiaries above his own.  Any transaction that the Trustee engages in that involves the Trustee’s own personal account or personal interests and Trust assets in voidable by a Beneficiary unless it fits into a particular exception.  Exceptions include if the transaction was authorized by the Trust, approved by the Court, the Beneficiary provided informed consent, or the transaction was entered into before the Trustee became a Trustee.   A conflict is presumed if the transaction involves the Trustee’s spouse, children, siblings, parent, attorney, etc.  A Trustee cannot steal a business opportunity belonging to the Trust. 

Whether you are a Trustee or Beneficiary, lack of knowledge of your responsibilities or rights can be costly.  Consider consulting a trust administration attorney for guidance.

To read Part I of this series on What is a Trust and Who Has to Know About it see http://www.perlalaw.com/blog/lessons-for-trustees-and-beneficiaries-part-i-what-is-a-trust-and-who-has-to-know-about-it/

To read Part II of this series on Safeguarding Trust Property see http://www.perlalaw.com/blog/lessons-for-trustees-and-beneficiaries-part-ii-safeguarding-trust-property/

To read Part III of this series on Investing Trust Assets see http://www.perlalaw.com/blog/lessons-for-trustees-and-beneficiaries-part-iii-%e2%80%93-investing-trust-assets/