Is a fiduciary allowed to invest trust assets in their own business?

A fiduciary is generally prohibited from investing trust assets in their own business primarily due to the inherent conflict of interest this creates. The fundamental duty of a fiduciary is to act in the best interests of the beneficiaries, which includes making prudent investment decisions that prioritize the beneficiaries’ financial well-being over personal gain.

When a fiduciary invests trust assets in their own business, it raises ethical and legal issues, as the fiduciary could be tempted to prioritize their own financial interests over those of the beneficiaries. This situation can lead to decisions that are not in line with the best interests of the beneficiaries, potentially resulting in losses or mismanagement of trust assets.

While there may be scenarios where beneficiaries can provide approval for such investments, it remains unsafe and not advisable due to the risk of self-dealing that could compromise the fiduciary's ability to fulfill their duties. Furthermore, even if a business is registered, this does not eliminate the conflict of interest that arises from a fiduciary's involvement in both the trust and the investment. Therefore, the general rule against a fiduciary investing trust assets in their own business helps to maintain trust, transparency, and accountability in fiduciary relationships.