Also known as: sole interest of the beneficiary · duty of loyalty · sole interest rule
Written by attorneys · grounded in primary & secondary sources — see below
A fiduciary obligation requiring a trustee to administer the trust exclusively for the benefit of the beneficiaries without regard to the trustee's personal interests or other considerations.
Select any source to read its text and confirm it supports the definition.
Steven Silva, a majority member in a member-managed LLC, learns of a client opportunity through company development work. He licenses the resulting module to his separate corporation and keeps all fees and equity. The company and minority member demand an accounting because Steven failed to act solely in the interest of the beneficiary company when he retained the benefit derived from company activities.
Sofia Stern and her partner draft an agreement that purports to eliminate the duty of loyalty for certain transactions. A court refuses to enforce the clause because the statute prohibits altering or eliminating the duty of loyalty except in narrow circumstances. The partners must still administer partnership affairs solely in the interest of the beneficiary partnership.
Santiago Sanchez proposes a partnership agreement clause that eliminates liability for negligent decisions. The statute bars any alteration or elimination of the duty of loyalty. Partners remain obligated to conduct partnership business solely in the interest of the beneficiary partnership despite the attempted contractual change.
Samuel Soto's defense lawyer learns the client intends to commit perjury at trial. The lawyer refuses to present the false testimony and threatens disclosure to the court. The lawyer's actions satisfy the duty of loyalty because counsel must act solely in the interest of the beneficiary client without assisting criminal conduct.
Sasha Stone, a general partner, derives a profit from a transaction involving partnership property. She retains the benefit for herself rather than turning it over to the partnership. The limited partnership may require an accounting because the general partner must administer affairs solely in the interest of the beneficiary partnership.
Simone Sanders enters a transaction with the partnership that would otherwise breach loyalty. After full disclosure of all material facts, the other partners authorize the deal. The ratification permits the transaction because partners may approve acts that would otherwise violate the requirement to act solely in the interest of the beneficiary partnership.
The duty requires the trustee to manage trust assets and make decisions exclusively for the beneficiaries without regard to personal gain or other interests. Self-dealing transactions are presumptively voidable unless authorized by the trust terms, approved by the court after notice, or consented to after full disclosure.
Supporting sources
…or his attorneys. Trial counsel for Reis urges that personal "aggrandizement” is prerequisite to a finding of a breach of duty of loyalty. But Reis’ aggrandizement or self-interest, weighty enough to cause him in these transactions to favor the corporation of which he was a director, was palpable enough. He himself wrote to…
…( Birnbaum v Birnbaum , 73 NY2d 461, 466 [1989]). “The trustee is under a duty to the
…such information to the other party as will assist in having the agreement upheld, as long as he or she does not violate the duty of loyalty
…into the trust. We noted in Kurrelmeyer I that the power of attorney made wife an agent of decedent and that a “fiduciary duty of loyalty
Court approval provides protection only when it follows full disclosure and satisfies statutory exceptions. Approval obtained without beneficiary notice or complete material facts leaves the transaction voidable by affected beneficiaries.
Supporting sources
The provision permits selection but does not excuse self-dealing or failure to disclose conflicts. The trustee must still exercise the power solely in the interest of the beneficiaries and cannot favor family members without competitive bids or fair terms.
Supporting sources
Yes. The sale creates a substantial conflict of interest and is voidable by any interested heir unless the will expressly authorizes it, the court approves after notice, or the heirs consent after full disclosure.
Supporting sources
No. The statute prohibits altering or eliminating the duty of loyalty except in narrow circumstances not applicable to wholesale waivers. Partners must still act solely in the interest of the partnership.
Supporting sources