§ 802. Duty of loyalty
(a) A trustee shall administer the trust solely in the interests of the beneficiaries.
(b) Subject to the rights of persons dealing with or assisting the trustee as provided
in section 1012 of this title, a sale, encumbrance, or other transaction involving the investment or management
of trust property entered into by the trustee for the trustee’s own personal account
or which is otherwise affected by a conflict between the trustee’s fiduciary and personal
interests is voidable by a beneficiary affected by the transaction unless:
(1) the transaction was authorized by the terms of the trust;
(2) the transaction was approved by the Probate Division of the Superior Court;
(3) the beneficiary did not commence a judicial proceeding within the time allowed by
section 1005 of this title;
(4) the beneficiary consented to the trustee’s conduct, ratified the transaction, or released
the trustee in compliance with section 1009 of this title;
(5) the transaction involves a contract entered into or claim acquired by the trustee
before the person became or contemplated becoming trustee; or
(6) the transaction was consented to in writing by a settlor of the trust while the trust
was revocable.
(c) A sale, encumbrance, or other transaction involving the investment or management of
trust property is presumed to be affected by a conflict between personal and fiduciary
interests if it is entered into by the trustee with:
(1) the trustee’s spouse;
(2) the trustee’s descendants, siblings, parents, or their spouses;
(3) an agent or attorney of the trustee; or
(4) a corporation or other person or enterprise in which the trustee, or a person that
owns a significant interest in the trustee, has an interest that might affect the
trustee’s best judgment.
(d) A transaction between a trustee and a beneficiary that does not concern trust property
but that occurs during the existence of the trust or while the trustee retains significant
influence over the beneficiary and from which the trustee obtains an advantage is
voidable by the beneficiary unless the trustee establishes that the transaction was
fair to the beneficiary.
(e) A transaction not concerning trust property in which the trustee engages in the trustee’s
individual capacity involves a conflict between personal and fiduciary interests if
the transaction concerns an opportunity properly belonging to the trust.
(f) An investment by a trustee in securities of an investment company or investment trust
to which the trustee, or its affiliate, provides services in a capacity other than
as trustee is not presumed to be affected by a conflict between personal and fiduciary
interests if the investment is fairly priced and otherwise complies with the prudent
investor rule of chapter 9 of this title. In addition to its compensation for acting
as trustee, the trustee may be compensated by the investment company or investment
trust for providing those services out of fees charged to the trust. If the trustee
receives compensation from the investment company or investment trust for providing
investment advisory or investment management services, the trustee must include in
the trustee’s annual report the rate and method by which that compensation was determined.
(g) In 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.
If the trust is the sole owner of a corporation or other form of enterprise, the trustee
shall elect or appoint directors or other managers who will manage the corporation
or enterprise in the best interests of the beneficiaries.
(h) This section does not preclude the following transactions, if fair to the beneficiaries:
(1) an agreement between a trustee and a beneficiary relating to the appointment or compensation
of the trustee;
(2) payment of reasonable compensation to the trustee;
(3) a transaction between a trust and another trust, decedent’s estate, or guardianship
of which the trustee is a fiduciary or in which a beneficiary has an interest;
(4) a deposit of trust money in a regulated financial-service institution operated by
the trustee; or
(5) an advance by the trustee of money for the protection of the trust.
(i) The Probate Division of the Superior Court may appoint a special fiduciary to make
a decision with respect to any proposed transaction that might violate this section
if entered into by the trustee. (Added 2009, No. 20, § 1; amended 2009, No. 92 (Adj. Sess.), § 9; 2009, No. 154 (Adj. Sess.), § 236, eff. February 1, 2011.)