Stepping into the role of Trustee for the first time can feel both meaningful and intimidating. You are taking on a job that carries legal authority, long-term responsibility, and a tangible impact on the people who will rely on you. Most new Trustees want to do the right thing, but they are not always sure what that looks like in practice. That is why these foundational rules matter. They answer the question, “What does Duty of Loyalty mean?”

They set the standard for what it means to act with integrity and to protect the intent of the person who created the trust.

Principles of Duty of Loyalty

One of the most critical expectations placed on every Trustee is the Duty of Loyalty. This duty guides how you make decisions, safeguard assets, and balance your own interests with those of the Trust. These principles are straightforward and strict. The following six tips help organize this material into practical guidance for your day-to-day work.

1. Always Act for the Benefit of the Trust and Its Beneficiaries
As a Trustee, you must always act in the interests of the Trust and its beneficiaries. You are serving as a Trustee for the benefit of someone other than yourself. You should not enter into a transaction that benefits you at the expense of the Trust.

2. Place the Interests of the Trust Above Your Personal Interests

If any situation should arise in which there is a conflict between your personal interests and the Trust, or between the Trust and the interests of third parties, you as Trustee should put the interests of the Trust first. For example, you, as a Trustee, should not sell Trust property to yourself or sell your property to the Trust because this might incline you to take advantage of the Trust.

3. Never Loan Trust Funds to Yourself

As a Trustee, you should not loan Trust funds to yourself for personal or business purposes. The rules outlined in this paragraph are strict and apply not only to transactions in which you would deal directly with yourself, but also prohibit transactions in which you, as a Trustee, would deal with organizations, such as partnerships or corporations, in which you are personally interested. This rule applies even when the transaction is scrupulously fair and even if it is favorable to the Trust.

4. Understand the Limited Exception for Revocable Living Trusts

These rules would not strictly apply to you as Trustee of a Revocable Living Trust created by you and in which you are the principal lifetime beneficiary.

5. Remember That the Duty of Loyalty Is Absolute

The Trustee owes an absolute Duty of Loyalty to the Trust’s beneficiaries. The list below is not complete, but the following actions by an individual Trustee are examples of a breach of the Duty of Loyalty:

• A Trustee of a business who engages in a competing business on his own behalf
• A Trustee of corporate stock who votes for himself as director or officer of the corporation
• A Trustee of one Trust selling to himself as Trustee of another Trust
• A Trustee under a lease taking renewal or buying a reversion for himself
• A Trustee with a Duty of Loyalty to buy for the Trust, who purchases for himself
• Accepting a gift from a person or entity with whom he conducts Trust business
• Acting both for the Trust and also for a third party who deals with the Trust
• Buying for oneself outstanding claims against interests in Trust property
• Buying the Trust’s property or properties at a sale forced by a third person
• Buying Trust property
• Employing himself to do specialized work for the Trust
• Indirect disloyalty, including dealings with relatives, affiliated parties, and similar persons
• Leasing Trust property to himself
• Securing an incident benefit to oneself while engaged in Trust business
• Selling his own property to the Trust

6. When In Doubt, Seek Guidance

Because the rules related to loyalty are stringent, Trustees benefit from working closely with an experienced estate planning attorney. Clear advice at the beginning of your service can prevent unintentional mistakes and ensure that you carry out the Trust exactly as intended.

Call Leigh Hilton PLLC Today!!

Having a competent attorney in your corner will help you and your family navigate the often overwhelming waters of protecting everything you own and everyone you love. That is our job, and we think we do it better than anyone else. Call Leigh Hilton PLLC so we can help ensure you and your family are taken care of in the best possible way. 

Leigh Hilton PLLC wants to be your first call every time for any estate planning need. We look forward to serving you.