KRS 386B.8-020: Duty of loyalty.

(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

KRS 386B.10 -110, 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:

(a) The transaction was authorized by the terms of the trust;

(b) The transaction was approved by the court;

(c) The beneficiary did not commence a judicial proceeding within the time

allowed by KRS 386B.10-050;

(d) The beneficiary consented to th e trustee's conduct, ratified the transaction, or

released the trustee in compliance with KRS 386B.10-090; or

(e) 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:

(a) The trustee's spouse;

(b) The trustee's descendants, siblings, parents, or their spouses;

(c) An agent or attorney of the trustee; or

(d) A corporation or other person or enterprise in which the trustee, or a person

that 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 benefici ary 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.

(6) 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 otherwise complies with KRS 286.3 -272

regarding investments in an associated company or trust. In addition to its

compensation for acting as trustee, the trustee may be compensated by the

investment company or investment trust f or providing those services out of fees

charged to the trust. If the trustee receives compensation from the investment

company or investment trust for providing investment advisory or investment

management services, the trustee shall at least annually noti fy the persons entitled

under KRS 386B.8 -130 to receive a copy of the trustee's annual report of the rate

and method by which that 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 shall not preclude the following transactions, if fair to the beneficiaries:

(a) An agreement between a trustee and a beneficiary relating to the appointment

or compensation of the trustee;

(b) Payment of reasonable compensation to the trustee;

(c) 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;

(d) A deposit of t rust money in a regulated financial institution operated by the

trustee;

(e) An advance by the trustee of money for the protection of the trust; or

(f) Any transaction authorized by any other statute under the laws of this

Commonwealth.

(9) The court may a ppoint a special fiduciary to make a decision with respect to any

proposed transaction that might violate this section if entered into by the trustee.