Rule 120 Conflict of Interests Transaction by Fiduciary
Rule Text
(a) CONFLICT OF INTERESTS TRANSACTION DEFINED.
(1) In General. A conflict of interests transaction is a sale, purchase, lease, encumbrance, or other transaction, involving property entrusted to a fiduciary or an opportunity belonging to the person, estate, or trust for which the fiduciary is acting, that is:
(A) entered into by the fiduciary for the fiduciary’s own personal account; or
(B) otherwise affected by a substantial conflict between fiduciary and personal interests.
(2) Related Persons or Entities. A sale, purchase, lease, encumbrance, or other transaction, involving property entrusted to a fiduciary or an opportunity belonging to the person, estate, or trust for which the fiduciary is acting, is presumed to be affected by a conflict of interests if entered into by the fiduciary with:
(A) the fiduciary’s spouse or domestic partner;
(B) the fiduciary’s descendants, siblings, parents, or their spouses;
(C) an agent of the fiduciary;
(D) the fiduciary’s attorney; or
(E) a corporation or other entity in which the fiduciary or a person listed in Rule 120(a)(2)(A)-(D) has a substantial beneficial interest.
(b) DISCLOSURE. Unless the governing instrument authorizes the transaction, a fiduciary must disclose all material information regarding a conflict of interests transaction to all parties, interested persons, beneficiaries, or other persons having a substantial beneficial interest in the estate or property entrusted to the fiduciary.
(c) VOIDABLE TRANSACTIONS. A conflict of interests transaction is voidable unless:
(1) the transaction is authorized by the substantive law applicable to the trust or estate entrusted to the fiduciary;
(2) the transaction is authorized by the governing instrument of the trust or estate entrusted to the fiduciary;
(3) after fair disclosure, the transaction is consented to or ratified by all persons having a substantial beneficial interest;
(4) after fair disclosure, the fiduciary was released from liability by all persons having a substantial beneficial interest;
(5) the transaction involved a contract entered into or claim acquired by the fiduciary before the fiduciary became or contemplated becoming the fiduciary; or
(6) the transaction is approved by the court.