Conflicts Of Interest And Acts Of Self-Dealing
The trustee must avoid all conflicts of interest, even the appearance of a conflict of interest, and certainly avoid any and all acts of self-dealing. Conflicted transactions and acts of self-dealing are either void or voidable under the law and will subject a trustee to damages, interest, attorney’s fees and costs, surcharge, and removal.
A client’s long time attorney drafts a trust for the client, which names the attorney as trustee. After client dies, the trust administration begins. The trustee sells a piece of real estate once believed to have been worth $2 Million for $10 Million. The trustee does not provide annual accountings to the beneficiaries and takes a $1 Million “trustee fee”, which he did not disclose. The trustee also paid $70,000 to his law firm for “attorneys fees”. Issue: Is the secret fee of $1 Million reasonable and could the trustee employ his own law firm? Answer: No.