Duty of impartiality
The duty of impartiality is the obligation of a trustee of a trust with two or more beneficiaries to act impartially, giving due regard to each beneficiary's interests. The Tennessee Uniform Trust Code applies that obligation to investing, managing and distributing. Pennsylvania treats the standard as equitable treatment in light of the trust's purposes, and equal treatment is not required.
How it works
The duty attaches to a trustee once a trust has two or more beneficiaries. Washington's statute requires a trustee of such a trust to act impartially in administering the trust and making distributions, with due regard to each beneficiary's interests.
Wyoming's duty of impartiality requires a trustee of a trust with two or more beneficiaries to act impartially in investing, managing and distributing trust property.
Pennsylvania's impartiality duty does not require a trustee to treat beneficiaries equally. The trustee must treat them equitably in light of the trust's purposes.
Where it shows up for owners of businesses, real estate and private investments
A trust that holds an operating company interest, rental real estate or private fund interests is a trust whose property the trustee invests, manages and distributes.
Trust and estate practitioners note that trustees are usually accountable to current and future beneficiaries. Fiduciaries balance interests between those groups when investing, managing and administering the trust.
Points that are easy to confuse
Impartial treatment and equal treatment are different ideas. Practitioners regard impartiality as not necessarily meaning equal treatment but equitable treatment in light of the trust's purposes and terms. Pennsylvania's law states the duty with the equitable standard as well.
Current beneficiaries and future beneficiaries are separate groups.
The statutory wording differs by state. Washington names administering the trust and making distributions. Tennessee and Wyoming name investing, managing and distributing. Each of those states ties the duty to a trust with two or more beneficiaries.
Common questions
Does impartiality mean a trustee treats every beneficiary equally?
Practitioners point to equitable treatment in light of both the purposes and the terms of the trust as the general approach.
When does the duty of impartiality apply to a trustee?
Washington's statute, Wyoming's duty and the Tennessee Uniform Trust Code each apply to a trustee of a trust with two or more beneficiaries. Tennessee refers to investing, managing and distributing, with due regard to each beneficiary's interests.