Clarence is the trustee of a trust. With $75,000 of his own money, Clarence purchases a parcel of real estate. Two months later, he sells the parcel to the trust for $150,000 and pockets the profit. Discuss the situation in terms of the duties and powers of the trustee.

Clarence has breached his fiduciary duty to the beneficiaries. Although he may have the power to purchase property on behalf of the trust (depending on the authority granted him by the settlor in the instrument creating the trust and rules of law in the applicable jurisdiction), he may not use the trust for his own personal gain. He can be compelled to turn over to the trust the profit that he made on the transaction. It is also possible that he can be ousted as trustee and that he may be liable for punitive damages for breach of his fiduciary duty to the trust.