A trustee’s obligations may include long-term asset management. They may need to maintain real property, help run a business or make decisions about investment resources. Generally speaking, trustees must act in the best interests of beneficiaries to uphold their fiduciary duty.
Limiting unnecessary expenses and maintaining the value of trust resources are both important for the preservation of a trust’s value. In some cases, trustees breach their duty by engaging in conduct intended for their own enrichment rather than the preservation or improvement of trust resources. Self-dealing is a common breach of fiduciary duty that may lead to litigation.
What behaviors constitute self-dealing?
Trustees often need to contract with outside parties for specific services. The trust typically covers those expenses. Self-dealing occurs when a trustee awards those paid tasks to themselves, their own professional practice or a business in which they have an ownership interest.
Self-dealing may also sometimes involve granting contracts and projects to professionals with whom they have a close relationship, such as their siblings or their spouse, or those who offer a kickback. Frequently, self-dealing involves overcharging, as competitive rates aren’t necessary when the award of the contract is guaranteed.
When a trust overpays for services, beneficiaries may ultimately receive less than they might otherwise deserve. If there is clear proof of self-dealing or other forms of financial misconduct, it may be possible to remove a trustee from their position and replace them with someone else better able to uphold that fiduciary duty.
Reviewing conduct that appears to be self-dealing with a legal professional could be helpful for concerned beneficiaries. Successful trust litigation can lead to the replacement of untrustworthy trustees and possibly even compensation for the economic impact of their misconduct.