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Arms length transaction in probate11/18/2023 It is often the case that a trustee is also a beneficiary of the trust. This means that the trustee is obligated to place the interests of beneficiaries above his or her personal interests at all times. As a fiduciary, a trustee has a legal duty of loyalty to the beneficiaries of the trust. Anytime a trustee’s own interests run contrary to the interests of beneficiaries, the stage is set for self dealing. In the context of a trust, self dealing occurs when a trustee benefits from the sale or purchase of trust assets, either directly or indirectly. And unless a trustee has obtained special approvals, they must not sell trust assets to themselves, make loans to themselves, make gifts, or otherwise divert trust assets for personally enriching purposes. To that end, trustees must be extremely careful to disclose and eliminate any conflicts of interest - even seemingly tangential ones. The reality is that when you agree to serve in a trustee capacity, you agree to subordinate your needs and desires to those of the beneficiary in every sense and situation. The golden rule of being a trustee is to never let your personal interests enter into any decision about managing trust funds and property. Self dealing in a trust happens when a trustee leverages assets in his or her own favor, usually to the detriment or potential detriment of the trust beneficiaries. You also may want to see our articles on family trust embezzlement and stealing and what to do if a sibling is stealing from an estate. Read on below for more on self dealing in a trust. And other cases where a trustee is accused of self dealing even when their actions proved to be in the best interest of the beneficiaries. We have seen many cases where a trustee genuinely didn’t know they were engaging in a self dealing transaction. Our experience on both sides of the aisle has taught us that trustee self dealing is a surprisingly frequent, often misunderstood, and almost certainly underreported offense.
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