Those who would dilute the trustee's duty of undivided loyalty

Charles E. Rounds, Jr.

As a general rule, the trustee has a duty to act solely in the interests of the beneficiaries. See, for example, UTC § 802(a), as well as the discussion of the no-further-inquiry rule in the Appendix below. That having been said, UTC § 802(g) provides that “[i]n voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries.” Why the downgrade, particularly when the corporation is wholly owned? What is the policy rationale for diluting at the intersection of trust and corporate law the loyalty principle via an exemption from the no-further-inquiry rule? Whether the trustee as corporate manager should be governed by the business judgment rule rather than the prudent investor rule is a separate issue involving levels of acceptable risk. For a general discussion of whether a trustee’s conduct as a matter of public policy should be subject to a sole-interests-of-the-beneficiary default standard, or the less rigorous best-interests-of-the-beneficiary default standard, see Loring and Rounds: A Trustee’s Handbook §6.1.3, pages 471-473 of the 2018 Edition, which pages are reproduced in the Appendix below.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles E. Rounds, Jr., Suffolk University Law School | Attorney Advertising

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Charles E. Rounds, Jr.

Suffolk University Law School on:

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