Ark. Code Ann. » Title 28 Chapter 73
Arkansas Code Annotated

Ark. Code Ann. § 28-73-802 (2020)

Duty of loyalty

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  1. A trustee shall administer the trust solely in the interests of the beneficiaries.
  2. Subject to the rights of persons dealing with or assisting the trustee as provided in § 28-73-1012, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee's own personal account or which is otherwise affected by a conflict between the trustee's fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:
    1. the transaction was authorized by the terms of the trust;
    2. the transaction was approved by a court;
    3. the beneficiary did not commence a judicial proceeding within the time allowed by § 28-73-1005;
    4. the beneficiary consented to the trustee's conduct, ratified the transaction, or released the trustee in compliance with § 28-73-1009; or
    5. the transaction involves a contract entered into or claim acquired by the trustee before the person became or contemplated becoming trustee.
  3. A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests if it is entered into by the trustee with:
    1. the trustee's spouse;
    2. the trustee's descendants, siblings, parents, or their spouses;
    3. an agent or attorney of the trustee; or
    4. a corporation or other person or enterprise in which the trustee, or a person who owns a significant interest in the trustee, has an interest that might affect the trustee's best judgment.
  4. A transaction between a trustee and a beneficiary that does not concern trust property but that occurs during the existence of the trust or while the trustee retains significant influence over the beneficiary and from which the trustee obtains an advantage is voidable by the beneficiary unless the trustee establishes that the transaction was fair to the beneficiary.
  5. A transaction not concerning trust property in which the trustee engages in the trustee's individual capacity involves a conflict between personal and fiduciary interests if the transaction concerns an opportunity properly belonging to the trust.
    1. An investment by a trustee in securities of an investment company or investment trust to which the trustee, or its affiliate, provides services in a capacity other than as trustee is not presumed to be affected by a conflict between personal and fiduciary interests if the investment complies with the prudent investor rule of § 28-73-901 et seq.
    2. The trustee may be compensated by the investment company or investment trust for providing those services out of fees charged to the trust.
    3. If the trustee receives compensation from the investment company or investment trust for providing management services, the trustee shall at least annually notify the persons entitled under § 28-73-813 to receive a copy of the trustee's annual report of the rate and method by which the compensation was determined.
  7. In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.
  8. This section does not preclude the following transactions, if fair to the beneficiaries:
    1. an agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;
    2. payment of reasonable compensation to the trustee;
    3. a transaction between a trust and another trust, decedent's estate, or conservatorship of which the trustee is a fiduciary or in which a beneficiary has an interest;
    4. a deposit of trust money in a regulated financial service institution operated by the trustee; or
    5. an advance by the trustee of money for the protection of the trust.
      1. A court may appoint a special fiduciary to make a decision with respect to any proposed transaction that might violate this section if entered into by the trustee.

(j) Subsections (b)-(e) apply only to irrevocable trusts created on or after September 1, 2005, and to revocable trusts which become irrevocable on or after September 1, 2005.

History. Acts 2005, No. 1031, § 1.

Case Notes

Claims for Breach of Trust.

Beneficiary's claims that the trustee converted trust assets, deposited proceeds into her personal accounts, and actively concealed and failed to disclose her dealings with trust assets and investment of proceeds were assertions of breach of trust; therefore, the statute of limitations in the Arkansas Trust Code in § 28-73-1005 controlled, rather than the more general three-year tort limitations period in § 16-56-105. Peck v. Peck, 2019 Ark. App. 190, 575 S.W.3d 137 (2019).

Duty of Loyalty.

Appellant beneficiary, who argued that appellees owed a duty of loyalty to her in their administration of a trust, presented issues of material fact to be tried concerning a conflict between a co-trustee's fiduciary and personal interests and how it may have affected his vote preventing appellant from purchasing a 1.5-acre tract adjoining his land. Therefore, summary judgment in this case was inappropriate. Pulliam v. Murphy, 2016 Ark. App. 133, 485 S.W.3d 711 (2016).

Sales to Cotrustee.

Circuit court did not err in refusing to approve the sale of a trust property to one cotrustee where the transaction required a higher level of scrutiny under this section, court approval was required and not just majority agreement, there was conflicting evidence of the property’s value, two cotrustees were interested in purchasing the property and offered differing values, and there was evidence that two cotrustees were trying to exclude the other cotrustee from trust transactions and had not discussed the sale with her before filing the petition. Wylie v. Shaw (In re GNB III Trust), 2019 Ark. App. 171, 574 S.W.3d 159 (2019).

Summary Judgment Improper.

Genuine issues of material fact prevented summary judgment on a shareholder's claim that a bank breached a fiduciary duty where, inter alia, the shareholder alleged that he believed he was placing his individually held stock into a newly created revocable trust to protect his shares from creditors, he asked for help from an attorney who may have represented both the shareholder and the bank at relevant times, and he may not have been fully informed about the implications of the stock-transfer transaction, including the type of trust that was receiving the intended transfer. Ash v. First Nat'l Bank of E. Ark., 2019 Ark. App. 147, 573 S.W.3d 584 (2019).

Notes of Decisions
Cited in 6 cases (1 in the last 5 years), 2009–2023 · leading case: Ash v. First Nat'l Bank of E. Ark., 2019 Ark. App. 147, 573 S.W.3d 584.
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Ash v. First Nat'l Bank of E. Ark., 2019 Ark. App. 147, 573 S.W.3d 584. · cites it 4× “Ark. Code Ann. § 28-73-802 (a) (Supp. 2017).”
Peck v. Peck, 2019 Ark. App. 190, 575 S.W.3d 137. · cites it 2× “A trustee owes a duty to administer the trust in the interests of the trust beneficiaries, Ark. Code Ann. § 28-73-802 (a), and a commingling of assets would be a "violation by a trustee of a duty the trustee owes to a beneficiary.”
Pulliam v. Murphy, 2016 Ark. App. 133, 485 S.W.3d 711. · cites it 4× “Duty of Loyalty Arkansas Code Annotated section 28-73-802(a) (Repl. 2012) provides that a trustee shall administer the trust solely in the interests of the beneficiaries.”
Carolyn Nolen v. Fairshare Vacation Owners Ass'n, No. 22-11128 (11th Cir. Aug. 31, 2023). · cites it 4× “Ark. Code Ann. § 28-73-802 (a)–(c). 8 The district court held that counts 2 to 4 fail to state a claim under section 802 because they contain no allegations that the con- ditions set out in subsections 802(b)(1) to (b)(5) are met.”
Matter of GNB III Trust v. Shaw, 2019 Ark. App. 171, 574 S.W.3d 159. · cites it 4× “Facts and Procedural History Wylie and Bobo, pursuant to Arkansas Code Annotated section 28-73-802 (Repl. 2012), petitioned the Hempstead County Circuit Court to approve Bobo's offer to purchase trust property.”
Hanna ex rel. Hanna v. Hanna, 335 S.W.3d 438 (Ark. Ct. App. 2009). · cites it 2× “See Ark.Code Ann. § 28-73-802(a) (Supp.2009).”
Ark. Code Ann. § 28-73-802(a): 2 cases
Pulliam v. Murphy, 2016 Ark. App. 133, 485 S.W.3d 711. “Duty of Loyalty Arkansas Code Annotated section 28-73-802(a) (Repl. 2012) provides that a trustee shall administer the trust solely in the interests of the beneficiaries.”
Hanna ex rel. Hanna v. Hanna, 335 S.W.3d 438 (Ark. Ct. App. 2009). “See Ark.Code Ann. § 28-73-802(a) (Supp.2009).”
Ark. Code Ann. § 28-73-802(b): 1 case
Pulliam v. Murphy, 2016 Ark. App. 133, 485 S.W.3d 711. “Duty of Loyalty Arkansas Code Annotated section 28-73-802(a) (Repl. 2012) provides that a trustee shall administer the trust solely in the interests of the beneficiaries.”
Ark. Code Ann. § 28-73-802(b)(2): 1 case
Matter of GNB III Trust v. Shaw, 2019 Ark. App. 171, 574 S.W.3d 159. “Facts and Procedural History Wylie and Bobo, pursuant to Arkansas Code Annotated section 28-73-802 (Repl. 2012), petitioned the Hempstead County Circuit Court to approve Bobo's offer to purchase trust property.”
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