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Trustee Loyalty, Administration, Business Transactions

A trustee has a fiduciary duty of loyalty in administering a trust. In the context of litigation, “the presumption is that a trustee has acted in good faith and the burden is on the one questioning his [or her] actions and seeking to establish a breach of trust to prove the contrary.” Jarvis v. Boatmen’s Nat’l bank of St. Louis, 478 S.W.2d 266, 273 (Mo. 1972). However, “where a trustee has an individual interest in a transaction involving a trust asset, a trustee bears the burden of proving that his [or her] actions were proper and all doubts are resolved against him [or her].” Deutch v. Wolff, 994 S.W.2d 561, 569 (Mo. 1999). Depending on the nature of the claimed breach of trust, the burden of proof may actually be on the trustee to prove his or her innocence. 

The Missouri Trust Code has mostly accepted and expanded on this legal precedent. Under Section 456.8-802, RSMo, a sale, encumbrance or other transaction involving the investment is presumed to be affected by a conflict between personal and fiduciary interests if it is entered into by the trustee with: (1) the trustee’s spouse, (2) the trustee’s descendants, siblings, parents, or their spouses, (3) an agent or attorney of the trustee, or (4) a corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee’s best judgment. The language in this statute is quite broad, and, therefore, a trustee should be extraordinarily cautious in effectuating trust transactions. Moreover, even a transaction not concerning trust property in which the trustee engages in the trustee’s individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust. Section 456.8-802.5, RSMo. 

Breach of the foregoing standards could give rise to money damages or a trustee removal suit. Contact with questions.