Which statement best describes the fiduciary duty of loyalty in a trust?

Which statement best describes the fiduciary duty of loyalty in a trust?

• A. The trustee must act solely in the best interests of the beneficiaries and avoid self-dealing.
• B. The trustee may place their own interests ahead of beneficiaries if their actions benefit the trust later.
• C. The trustee's duties are optional if the trust terms say so.
• D. The trustee can ignore conflicts if there are only a few beneficiaries.

Answer: (A)

The key idea is that a trustee must act with undivided loyalty to the beneficiaries, putting their interests above the trustee’s own at all times. This means every decision about trust assets—how they’re invested, managed, and distributed—should be made to benefit the beneficiaries, not to advance the trustee’s personal interests. Self-dealing is a classic breach of this duty. A trustee cannot use trust property for personal gain, cannot profit from trust opportunities, and cannot prefer personal arrangements over fair terms for the trust. If a potential conflict exists, it should be disclosed, and the trustee should seek consent from the beneficiaries or a court, or recuse themselves from the decision. Duties of loyalty aren’t optional; they apply regardless of how many beneficiaries there are, and they trump any informal preference for “saving” a few for the trustee’s future. For example, buying or selling trust property to the trustee on favorable terms, or diverting a trust opportunity to personal benefit, would violate loyalty. So describing loyalty as acting solely in the beneficiaries’ best interests and avoiding self-dealing best captures this obligation.

The key idea is that a trustee must act with undivided loyalty to the beneficiaries, putting their interests above the trustee’s own at all times. This means every decision about trust assets—how they’re invested, managed, and distributed—should be made to benefit the beneficiaries, not to advance the trustee’s personal interests.

Self-dealing is a classic breach of this duty. A trustee cannot use trust property for personal gain, cannot profit from trust opportunities, and cannot prefer personal arrangements over fair terms for the trust. If a potential conflict exists, it should be disclosed, and the trustee should seek consent from the beneficiaries or a court, or recuse themselves from the decision.

Duties of loyalty aren’t optional; they apply regardless of how many beneficiaries there are, and they trump any informal preference for “saving” a few for the trustee’s future. For example, buying or selling trust property to the trustee on favorable terms, or diverting a trust opportunity to personal benefit, would violate loyalty.

So describing loyalty as acting solely in the beneficiaries’ best interests and avoiding self-dealing best captures this obligation.