Which rule prohibits a trustee from using trust assets for personal gain or conflicts of interest?

Which rule prohibits a trustee from using trust assets for personal gain or conflicts of interest?

• A. The fiduciary accounting requirement.
• B. The no-contest clause.
• C. The self-dealing prohibition.
• D. The residue clause.

Answer: (C)

The trustee’s duty of loyalty is the central idea here. They must manage trust assets solely for the beneficiaries’ benefit and avoid any use of those assets for their own gain or for personal interests that conflict with the trust’s purpose. The self-dealing prohibition directly targets this issue: it bars trustees from engaging in transactions that personally benefit them at the expense of the beneficiaries, and it requires avoiding conflicts of interest. If a potential conflict arises, the typical remedy is disclosure and, often, seeking approval from the beneficiaries or a court, or ensuring the transaction is fair and conducted at arm’s length. Other terms don’t address this conflict-of-interest safeguard. The fiduciary accounting requirement deals with keeping accurate records and reporting finances. The no-contest clause affects challenges to the trust, not how a trustee administers assets. The residue clause describes how remaining assets are distributed after specific gifts, not trustee conduct.

The trustee’s duty of loyalty is the central idea here. They must manage trust assets solely for the beneficiaries’ benefit and avoid any use of those assets for their own gain or for personal interests that conflict with the trust’s purpose. The self-dealing prohibition directly targets this issue: it bars trustees from engaging in transactions that personally benefit them at the expense of the beneficiaries, and it requires avoiding conflicts of interest. If a potential conflict arises, the typical remedy is disclosure and, often, seeking approval from the beneficiaries or a court, or ensuring the transaction is fair and conducted at arm’s length.

Other terms don’t address this conflict-of-interest safeguard. The fiduciary accounting requirement deals with keeping accurate records and reporting finances. The no-contest clause affects challenges to the trust, not how a trustee administers assets. The residue clause describes how remaining assets are distributed after specific gifts, not trustee conduct.