A trustee sells Blackacre to himself in his capacity as trustee. Which statement best describes the transaction?

• A. It is allowed if the transaction is fair to the trust.
• B. It is permitted if the trustee acts in the best interests.
• C. It is allowed if all beneficiaries approve after the sale.
• D. It constitutes self-dealing and is prohibited, with no further inquiry defense.

Answer: (D)

The key idea is the trustee’s duty of loyalty. A trustee may not put personal interests ahead of the beneficiaries, so a sale of trust property to the trustee himself creates an unavoidable conflict of interest. Because of that, the transaction is treated as self-dealing and is prohibited. The fact that the deal might seem fair or that all beneficiaries later approve does not cure the breach—self-dealing undermines the trustee’s loyalty to the trust. Only explicit authorization in the trust instrument, or court approval (or equivalent clear consent from all beneficiaries) could ever permit such a transaction; absent that, the deal is invalid. So the best description is that it constitutes self-dealing and is prohibited, with no automatic defense based on fairness after the fact.