Daily Law Group
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What is trustee self-dealing?

When you create a trust and hand the keys to your assets over to another individual, you expect that this person has the character to hold that position without abusing its authority. However, far more often than you might suspect, trustees may not always act in the best interests of the trust's creator or beneficiaries.

In some instances, this is simply a matter of allowing personal conflicts between those associated with the trust and the trustee to take precedence. This can compromise the trustee's perspective and decisions and present a very frustrating turn of events. However, with careful handling, it is possible to resolve the interpersonal conflicts and still enjoy quality work from the trustee.

In cases where you suspect that the trustee has used his or her position for personal gain, you may have cause to remove the trustee on grounds of self-dealing. This creates a difficult scenario to navigate. You'll need to handle the matter with finesse to avoid alarming the trustee and triggering further potentially harmful actions.

Self-dealing while acting on others' behalf

There are many instances in which identifying opportunities for self-enrichment and acting on those opportunities is not considered illegal or even unethical. Yet, trustees accept a number of restrictions as a part of their positions.

The trustee who acts on your behalf has significant power to use your assets in numerous ways as he or she sees fit as long as it ostensibly benefits you or serves your pre-determined objectives. In return for using impartial judgment — and to deter trustees from abusing their privileges — serving as a trustee usually entails some form of compensation. Ideally, this is the primary (or sole) way that trustees benefit from their positions. This allows them to remain impartial and committed to serving your interests.

Often, however, the lines between serving your interests and serving the interests of the trustee get fuzzy. There are many indirect ways that a trustee might make a financial decision that greatly benefits your purposes while also benefiting him or her in some way. This is probably not grounds to accuse someone of self-dealing as long as this choice did not deny you some larger gain. To put it another way, a trustee should seek to make the best financial decisions for your assets regardless of each decision's impact on the trustee.

If you have grounds to believe that your trust and the underlying assets suffered harm because of choices that benefited your trustee, you should proceed with great caution.

Protect yourself sooner than later

Selecting a trustee is a great responsibility for both the trust creator and the trustee who serves in the position. Be sure to consider all the issues carefully and take specific steps to protect your interests with the full strength of the law, while keeping your rights secure and your legacy protected.

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