C.R.S. § 15-1.1-105 Loyalty

• Library: Colorado Statutes
• Edition: 2023
• Currency: Current through 2023 Regular and 1st Extraordinary Session
• Year: 2023
• Citation: C.R.S. § 15-1.1-105

A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.

Cite as C.R.S. § 15-1.1-105

History: L. 95: Entire article added, p. 311, § 1, effective July 1.

Note:

OFFICIAL COMMENT

The duty of loyalty is perhaps the most characteristic rule of trust law, requiring the trustee to act exclusively for the beneficiaries, as opposed to acting for the trustee's own interest or that of third parties. The language of Section 4 of this Act derives from Restatement of Trusts 3d: Prudent Investor Rule § 170 (1992), which makes minute changes in Restatement of Trusts 2d § 170 (1959).

The concept that the duty of prudence in trust administration, especially in investing and managing trust assets, entails adherence to the duty of loyalty is familiar. ERISA § 404(a)(1)(B), 29 U.S.C. §1104(a)(1)(B) , extracted in the Comment to Section 1 of this Act, effectively merges the requirements of prudence and loyalty. A fiduciary cannot be prudent in the conduct of investment functions if the fiduciary is sacrificing the interests of the beneficiaries.

The duty of loyalty is not limited to settings entailing self-dealing or conflict of interest in which the trustee would benefit personally from the trust. "The trustee is under a duty to the beneficiary in administering the trust not to be guided by the interest of any third person. Thus, it is improper for the trustee to sell trust property to a third person for the purpose of benefitting the third person rather than the trust." Restatement of Trusts 2d § 170, comment q, at 371 (1959).