Trusts: Duty of Loyalty

A trustee has a fiduciary duty of loyalty to act in the best interests of the trust’s beneficiaries. While the Settlor (i.e., trust-maker) is alive and has capacity to revoke the trust, the duties of the trustee are owed exclusively to the Settlor. Section 456.6-603, RSMo. There is typically a shift in these duties when the Settlor dies in that different beneficiaries will then have an immediate, vested interest in the trust assets.

To the surprise of some, a trustee’s fiduciary duty extends to assets and transactions which occur outside of the trust but while the trustee-beneficiary relationship exists. Under Section 456.8-802, RSMo:

“A transaction between a trustee and a beneficiary that does not concern trust property but that occurs during the existence of the trust or while the trustee retains significant influence over the beneficiary and from which the trustee obtains an advantage is voidable by the beneficiary unless the trustee establishes that the transaction was fair to the beneficiary.”

Moreover, “opportunities” that may properly belong to the trust that go elsewhere because of the trustee’s conduct may also give rise to a breach of trust. As of this writing, few cases in Missouri exist discussing what constitutes trust opportunities in the context of a trustee’s duty of loyalty.

Contact regarding trust litigation, breach of trust and/or breach of fiduciary duty.

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