3.1 Duty “To Act in Good Faith …”

Under the Uniform Trust Code, regardless of the terms of the instrument, a trustee has a duty “to act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.”[1] The good faith formulation, of course, was one of the traditional grounds for courts to intervene and take corrective action in abuse of discretion cases:

[E]quity has established certain limitations on this doctrine (of non-intervention) which are deemed to be necessary to prevent the frustration of the settlor’s intent and inequitable conduct by the trustee.*                   *                   *

Many courts describe the cases where they review and upset the trustee’s use of discretionary powers as those involving “an abuse of discretion,” “bad faith,” “dishonesty,” or “arbitrary” action. It is believed that these phrases cover a variety of improper actions, for example, acting for the benefit of the trustee himself, or some third person, or for the purpose of harming the beneficiary or out of ill will or prejudice against him, or an action contrary to the purpose of the trust.[2]