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When someone is appointed to manage another person’s money, property, or estate, they take on one of the most serious responsibilities the law recognizes. Whether they serve as a trustee, executor, administrator, guardian of an estate, or power of attorney, they become a fiduciary. With that role comes a set of strict legal duties — including one of the most fundamental: the duty of loyalty.
If you are a beneficiary of a trust or estate in Texas and you suspect the fiduciary is putting their own interests ahead of yours, you may have legal options. Understanding the fiduciary duty of loyalty is the first step.
The fiduciary duty of loyalty requires that a trustee, executor, or other fiduciary act solely in the interest of the beneficiaries — not in their own interest, not in the interest of a third party, and not in any dual capacity that creates a conflict. Under the Texas Trust Code, a trustee has a duty to administer the trust solely in the interests of the beneficiaries.
In plain terms, the fiduciary must put you first. Their personal gain, their family connections, their business interests, their friendships — none of these should influence how they manage assets that belong to the trust or estate.
This does not mean the fiduciary cannot be compensated for their work. Reasonable trustee compensation is allowed under Texas law unless the trust instrument expressly prohibits it. But the moment the fiduciary’s personal financial interests begin to shape the decisions they make with trust or estate assets, the duty of loyalty may be compromised.
Breaches of the fiduciary duty of loyalty are not always obvious. In some cases, the fiduciary openly takes money from the estate for personal use. In other cases, the conduct is far more subtle. Common examples include:
Self-dealing. A trustee sells trust property to themselves, or to a business they own or control, often at below-market prices. This is one of the most frequently litigated forms of disloyalty under Texas fiduciary law.
Favoring one beneficiary over another. If a trust has multiple beneficiaries, the fiduciary must treat them evenhandedly. Deliberately shifting benefits toward one beneficiary — especially a family member or business partner — may constitute a breach.
Using trust assets for personal benefit. A fiduciary who uses trust funds to pay personal debts, fund personal investments, or otherwise advance their own financial position has likely violated the duty of loyalty.
Conflicted transactions. A trustee who invests trust assets in a company where they hold a financial interest, without proper disclosure and consent, may be in violation of their duty.
Taking undisclosed commissions or kickbacks. Receiving payments from a third party in exchange for directing trust business — without disclosure to the beneficiaries — is a textbook breach.
Texas law takes a strong position on self-dealing. Under the Texas Trust Code, a trustee who engages in a transaction involving trust property in which they have a personal interest may be required to restore to the trust any profit gained and to compensate for any loss caused in the form of damages or disgorgement.
This is sometimes referred to as the “no further inquiry” rule in other jurisdictions. In certain self-dealing situations, Texas courts do not require proof that the transaction was actually unfair. The conflict itself (the transaction) can be enough to render the transaction voidable.
There are limited exceptions. A transaction may be permissible if it was expressly authorized by the trust instrument, approved by all beneficiaries with full disclosure, or authorized by a court after proper notice. But these exceptions are narrow, and the burden generally falls on the fiduciary to prove that the transaction was fair.
If you believe a fiduciary has breached their duty of loyalty, you do not have to wait and hope the situation corrects itself. Texas law gives beneficiaries meaningful remedies.
A court may void a conflicted transaction. The fiduciary may be required to return profits and restore losses to the trust or estate. In serious cases, the court may remove the fiduciary from their role entirely. Further, if the breach caused further harm, the fiduciary may face personal liability for damages.
To pursue any of these remedies, you will need to gather evidence, understand the terms of the trust or estate, and work with a Texas fiduciary litigation attorney who knows how to build a case before a probate court.
Beneficiaries of trusts and estates are often in a vulnerable position. They depend on the fiduciary to manage assets they cannot directly control. They may be grieving. They may not have full visibility into what the fiduciary is doing. And they may not even realize they have been harmed until years after the breach occurred.
The duty of loyalty exists precisely because of this imbalance of power. It is the legal foundation that holds fiduciaries accountable and gives beneficiaries a right to expect honest, undivided service.
If something feels wrong about how a trust or estate is being managed, trust that instinct. Asking questions, reviewing accountings, and consulting with a Texas fiduciary litigation attorney are all reasonable steps — and they may reveal more than you expect.
At Barr Law, PLLC, we represent beneficiaries and interested parties in fiduciary litigation throughout Texas. If you believe a trustee, executor, or other fiduciary is not honoring their duty of loyalty, we are here to help you understand your rights and your options.
Reach out today, and let Barr Law guide you with strategic counsel and unwavering support from the outset of your legal matter.
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