Also known as:good faith & for value · bona fide for value
Written by attorneys · grounded in primary & secondary sources — see below
A statutory protection that shields a non-beneficiary third party from liability when the party assists or transacts with a fiduciary such as a trustee or personal representative. The protection applies when the third party acts without knowledge that the fiduciary is exceeding or improperly exercising powers and provides value in the exchange. The third party is treated as if the fiduciary had acted with proper authority.
Sources & Authorities
How it applies
Common Examples
2
Brokerage Margin Loan to Trustee
Mia serves as trustee of an investment trust and opens a margin account at Harborview Brokerage, pledging trust bonds as collateral despite a trust prohibition on borrowing. Harborview reviews the trustee documentation, extends credit in the ordinary course, and has no actual knowledge of the restriction. When the trades collapse and beneficiaries sue, Harborview is protected because it dealt in good faith and for value without knowledge of the improper exercise of power.
Purchaser from Estate Representative
Leo, personal representative of Paula's estate, sells a building to Harborline Development despite a will clause favoring retention for grandchildren. The court issued unrestricted letters of authority that Harborline reviewed along with a title report. Harborline paid market value without actual knowledge of the will restriction. Nora's later challenge fails because Harborline is protected as if Leo had properly exercised his powers.
Put it into practice
Test Yourself
9
Practice Questions5
· 4 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Study Supplements
Duke, In re Estate of352 P.3d 863 (Cal. 2015)
Common questions
Frequently Asked
4
Does a buyer have a duty to investigate a trustee's powers simply because the buyer knows it is dealing with a trustee?+
No. A person who deals with a trustee in good faith is not required to inquire into the extent of the trustee's powers or the propriety of their exercise. The protection turns on the absence of actual knowledge of an improper exercise rather than on any duty to investigate.
Supporting sources
What happens if a good-faith purchaser for value later learns that the trustee misused the sale proceeds?+
The purchaser remains protected. A person who pays or delivers assets to a trustee in good faith need not ensure their proper application. The statute shields the purchaser from liability even if the trustee later misapplies the funds.
Supporting sources
Can a will restriction on a personal representative's power defeat title held by a good-faith purchaser for value?+
No. Internal will provisions limiting a personal representative's authority generally do not bind third parties who lack actual knowledge of the limits and who deal in good faith for value. The purchaser is protected as if the representative properly exercised the power.
Supporting sources
Does the protection apply when a third party deals with a former trustee without knowing the trusteeship has ended?+
Yes. A person who in good faith and for value deals with a former trustee without knowledge that the trusteeship has terminated receives the same protection as if the former trustee were still serving.
Supporting sources
Trusts and Estates Trusts and Future InterestsTrusts · Powers and duties of trusteesUBEFoundational