Rule 120 - Conflict of Interests Transaction by Fiduciary(a) CONFLICT OF INTERESTS TRANSACTION DEFINED.(1)In General. A conflict of interests transaction is a sale, purchase, lease, encumbrance, or other transaction, involving property entrusted to a fiduciary or an opportunity belonging to the person, estate, or trust for which the fiduciary is acting, that is: (A) entered into by the fiduciary for the fiduciary's own personal account; or(B) otherwise affected by a substantial conflict between fiduciary and personal interests.(2)Related Persons or Entities. A sale, purchase, lease, encumbrance, or other transaction, involving property entrusted to a fiduciary or an opportunity belonging to the person, estate, or trust for which the fiduciary is acting, is presumed to be affected by a conflict of interests if entered into by the fiduciary with: (A) the fiduciary's spouse or domestic partner;(B) the fiduciary's descendants, siblings, parents, or their spouses;(C) an agent of the fiduciary;(D) the fiduciary's attorney; or(E) a corporation or other entity in which the fiduciary or a person listed in Rule 120(a)(2)(A)-(D) has a substantial beneficial interest.(b) DISCLOSURE. Unless the governing instrument authorizes the transaction, a fiduciary must disclose all material information regarding a conflict of interests transaction to all parties, interested persons, beneficiaries, or other persons having a substantial beneficial interest in the estate or property entrusted to the fiduciary.(c) VOIDABLE TRANSACTIONS. A conflict of interests transaction is voidable unless: (1) the transaction is authorized by the substantive law applicable to the trust or estate entrusted to the fiduciary;(2) the transaction is authorized by the governing instrument of the trust or estate entrusted to the fiduciary;(3) after fair disclosure, the transaction is consented to or ratified by all persons having a substantial beneficial interest;(4) after fair disclosure, the fiduciary was released from liability by all persons having a substantial beneficial interest;(5) the transaction involved a contract entered into or claim acquired by the fiduciary before the fiduciary became or contemplated becoming the fiduciary; or(6) the transaction is approved by the court.Adopted by Order dated March 4, 2022, effective 8/22/2022.COMMENT
Conflict of interests transactions as defined in this rule do not include a fiduciary's compensation or agreements with respect to a fiduciary's compensation.
A person seeking court approval of a conflict of interests transaction should file a petition consistent with the statute and court rules applicable to the relevant fiduciary estate.
This rule does not affect the rights of unrelated third parties who engaged in a transaction with a fiduciary without knowledge of the fiduciary's conflict of interests in the transaction.