Self-Dealing in Trust Administration

Self-dealing in trust administration refers to actions taken by a trustee that benefit themselves at the expense of the trust and its beneficiaries.

In the context of trust administration, the trustee has a fiduciary duty to act in the best interests of the trust and its beneficiaries, which means they must manage the trust assets impartially and without personal gain. Self-dealing occurs when the trustee engages in transactions that create a conflict of interest or result in personal profit, undermining their responsibility.

For example, if a trustee sells trust property to themselves at a price that is less than market value, this is considered self-dealing. Such actions can lead to legal consequences, including potential removal of the trustee, financial restitution to the trust, or damage claims from the beneficiaries.

In Texas, like in many jurisdictions, the law strictly prohibits self-dealing by trustees. The Texas Trust Code outlines specific rules regarding a trustee’s duties and the consequences of breaching those duties. If a trustee is found to have engaged in self-dealing, they may be held liable for any losses incurred by the trust as a result of their actions.

Overall, self-dealing significantly impacts trust administration, as it erodes the trust’s integrity and can harm the beneficiaries’ financial interests.