One of the most common offenses we deal with in our trust litigation practice is that of trustee self dealing. Trustees have very broad powers of discretion in managing trust assets, and they sometimes make transactions that benefit themselves instead of the trust beneficiaries. This is when a claim for breach of fiduciary duty for a trustee’s self dealing may need to be filed in civil court.

FULL ARTICLE: https://rmolawyers.com/self-dealing-c...

0:00 Introduction
0:46 What is self dealing in a trust?
1:46 How do you define self dealing?
2:49 Can a trustee self deal? Is self dealing illegal?
4:05 What is the self dealing rule for trustees?
4:27 Is trustee self dealing common?
5:00 Forms of Self Dealing Transactions
5:04 Makes gifts to themselves
5:08 Makes loans to themselves
5:20 Uses a third party or a separate account to divert funds for themselves
5:35 Overcompensates themselves for services rendered as trustee
5:49 Receives "kickbacks" or indirect income or compensation from anyone
6:25 The transaction was authorized by the trust instrument
6:30 The transaction was approved by the court
6:34 The beneficiaries approved, ratified or gave other approval of the transaction
6:56 What do I do if I suspect the trustee is self dealing or attempting to self deal?

Our experience on both sides of the aisle has taught us that trustee self dealing is a surprisingly frequent, often misunderstood, and almost certainly underreported offense. We have seen many cases where a trustee genuinely didn’t know they were engaging in a self dealing transaction. And other cases where a trustee is accused of self dealing even when their actions proved to be in the best interest of the beneficiaries.

Self Dealing Definition
In the context of a trust, self dealing occurs when a trustee benefits from the sale or purchase of trust assets, either directly or indirectly. Anytime a trustee’s own interests run contrary to the interests of beneficiaries, the stage is set for self dealing. As a fiduciary, a trustee has a legal duty of loyalty to the beneficiaries of the trust. This means that the trustee is obligated to place the interests of beneficiaries above his or her personal interests at all times.

Can a trustee self deal? Is self dealing illegal?
Under California law, self dealing is illegal, and a trustee must never engage in it. A claim of self dealing is a civil claim, meaning that unless the plaintiff also wants to press criminal charges for offenses like theft, embezzlement, or fraud, a self dealing trustee will generally not go to jail or have anything on their criminal record. This is one of the first things we tell our clients when in an initial consultation, because often a trustee is a family member or loved one. A beneficiary may take issue with a trustee’s actions, but they almost never want to press criminal charges.

What is the self dealing rule for trustees?
The basic rule on self dealing is that a trustee must never place himself in a position where he gains any benefit to the detriment of a beneficiary. This is obviously a very broad directive, leaving lots of grey area in terms of defining what is and isn’t self-dealing.

What is a breach of fiduciary duty self dealing?
Self dealing is a type of breach of fiduciary duty. When you claim that a trustee has engaged in self dealing, you are claiming that he has breached his fiduciary duty to the trust’s beneficiaries. For more on fiduciary duty, and how it applies to a trustee or executor more specifically, see our guide to breach of fiduciary duty.

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About RMO Lawyers:
RMO LLP serves clients in Los Angeles, Santa Monica, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri and Kansas.

Our founder, Scott E. Rahn has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation