Trustees and fiduciaries in Virginia
Key takeaway
Virginia trustee rules address delegation to agents, the prudent investor rule, removal, conflicts of interest, exculpatory clauses, and compensation. The rules matter to owners of businesses, real estate, and private investments who act as trustees or name them. Spouses and adult children who are beneficiaries also fall within the rules.
Delegation by a trustee
Virginia law permits a trustee to delegate duties that a trustee of comparable skills could delegate. The trustee must use reasonable care in selecting the agent, defining the agent's work, and monitoring that work.
The prudent investor rule
Virginia law makes the prudent investor rule a default duty for trustees managing trust assets, subject to specified exceptions.
Trust provisions may expand, restrict, eliminate, or alter the rule. A general investment authorization in the trust is not construed to waive it.
Trustees may delegate investment and management functions that a trustee of comparable skills could delegate. The delegation is subject to care in selecting, defining, and monitoring the agent's work.
Vacancies and removal of a trustee
Under Virginia's Uniform Trust Code, a trusteeship vacancy need not be filled while cotrustees remain in office. A vacancy must be filled if the trust has no remaining trustee.
The settlor, a cotrustee, or a beneficiary may petition to remove a Virginia trustee.
A Virginia court may remove a trustee after a substantial change of circumstances or a request by all qualified beneficiaries. The court must find that removal serves all beneficiaries, does not conflict with a material trust purpose, and that a successor is available.
Conflicts between fiduciary and personal interests
Under Virginia's Uniform Trust Code, a trustee transaction affected by a conflict between fiduciary and personal interests is voidable by an affected beneficiary, subject to listed exceptions.
A trust-property transaction is presumed conflicted if the trustee enters it with certain related persons or entities listed in the statute.
Voting shares or exercising control over other enterprises falls under a duty to act in the beneficiaries' best interests. When the trust solely owns an enterprise, the trustee elects or appoints directors or managers.
Records, exculpatory clauses, and compensation
Virginia law requires a trustee to designate trust property, where feasible, in a way that the trust's interest appears in records kept by someone other than a trustee or beneficiary.
An exculpatory clause drafted or caused to be drafted by the trustee is invalid in Virginia as an abuse of a confidential relationship unless the trustee proves it was adequately communicated to the settlor.
When the trust specifies trustee compensation, the Virginia trustee receives it. The court may allow more or less in listed circumstances.
Common questions
Is a Virginia trustee liable for the actions of a delegated agent?
A Virginia trustee who meets the statutory delegation duties is not liable to beneficiaries or the trust for the agent's action. For investment and management functions, a trustee who satisfies the statutory requirements is likewise not liable for the agent's decisions or actions.
Who else can seek removal of a trustee in Virginia?
The Attorney General may petition to remove the trustee of a charitable trust in Virginia. A Virginia court may also act on its own initiative, in addition to petitions from the settlor, a cotrustee, or a beneficiary.