Meridian Law Group
September 27th, 2023
Executors, Estate Trustees and the Illegality of “Self-Dealing” Estate Assets
Estate trustees, as fiduciaries, are required to act in the best interests of the estate beneficiaries. While this is a fundamental tenet of estate law, it is essential to reiterate when analyzing the court’s approach to legal principles stemming directly from it. One such principle is the concept of “self-dealing”, or the ability of an estate trustee to purchase estate or trust property for their own personal benefit.
Self-Dealing: Executors & Trustees Cannot Purchase Estate or Trust Assets
For centuries, courts have rejected self-dealing by estate trustees as a general rule. The rationale is premised on the notion that a trustee owes loyalty to the beneficiaries and, therefore, purchasing estate property for the trustee’s benefit inherently places the trustee in a conflict of interest.
Exceptions to the Rule Against Self-Dealing
There are two notable exceptions to the rejection of self-dealing:
- Circumstances where the beneficiaries consent to the trustee’s self-dealing (and the beneficiaries have the capacity to consent); or
- The court has approved the self-dealing.
Regarding the second exception, a court may approve self-dealing where a trustee can establish that no other purchaser is forthcoming or seems likely to come forward within a reasonable time period, and the trustee’s offer is favourable and to the advantage of the beneficiaries. This is a very high bar to meet.
