Definition of trustee
trustee (plural trustees)
- A person to whom property is legally committed in trust, to be applied either for the benefit of specified individuals, or for public uses; one who is intrusted with property for the benefit of another; also, a person in whose hands the effects of another are attached in a trustee process.
- To commit (property) to the care of a trustee; as, to trustee an estate.
- To attach (a debtor's wages, credits, or property in the hands of a third person) in the interest of the creditor.
Trustee is a legal term for a holder of property on behalf of a beneficiary. A trust can be set up either to benefit particular persons, or for any charitable purposes (but not generally for non-charitable purposes): typical examples are a will trust for the testator's children and family, a pension trust (to confer benefits on employees and their families), and a charitable trust. In all cases, the trustee may be a person or company, whether or not they are a prospective beneficiary.
General duties of trustees
Trustees have certain duties (some of which are fiduciary). These include the duty to carry out the express terms of the trust instrument, the duty to defend the trust, the duty to prudently invest trust assets, the duty of impartiality among the beneficiaries, the duty to account for their actions and to keep them informed about the trust, the duty of loyalty, the duty not to delegate, the duty not to profit, the duty not to be in a conflict of interest position and the duty to administer the trust in the best interest of the beneficiaries. These duties may be expanded or narrowed by the terms of the instrument creating the trust, but in most instances cannot be eliminated completely. Corporate trustees, typically trust departments at large banks, often have very narrow duties, limited to those explicitly defined in the trust indenture.
A trustee carries the fiduciary responsibility and liability to use the trust assets according to the provisions of the trust instrument (and often regardless of their own or the beneficiaries' wishes). The trustee may find himself liable to claimants, prospective beneficiaries, or third parties. In the event that a trustee incurs a liability (for example, in litigation, or for taxes, or under the terms of a lease) in excess of the trust property they hold, they may find themselves personally liable for the excess.
Trustees are generally held to a "prudent person" standard in regard to meeting their fiduciary responsibilities, though investment, legal, and other professionals can be held to a higher standard commensurate with their higher expertise. Trustees can be paid for their time and trouble in performing their duties only if the trust specifically provides for payment. It is common for lawyers to draft will trusts so as to permit such payment, and to take office accordingly: this may be an unnecessary expense for small estates.
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