Trustee: Definition, Example and Related Terms
What is a Trustee ?
A trustee must always act in the best interests of the beneficiaries and follow the terms set out in the trust document. They have what's called a 'fiduciary duty' - one of the highest standards of care in law. This means they must be honest, loyal, and careful in managing the trust's assets.
Key responsibilities of a trustee typically include: - Managing and investing trust assets prudently - Keeping detailed records of all transactions - Filing tax returns for the trust - Making distributions to beneficiaries according to trust terms - Avoiding conflicts of interest
For example, if parents set up a trust for their children's education, the trustee would be responsible for investing the money wisely and making sure it's used properly for educational expenses. The trustee must make decisions that balance current needs with long-term goals.
It's important to note that trustees can be held personally liable if they breach their fiduciary duties or mismanage trust assets. This is why choosing a trustee requires careful consideration, and why many people choose professional trustees like banks or trust companies for complex or valuable trusts.
Example(s)
Scenario Description Family Educational Trust A grandmother creates a trust for her grandchildren's college education. The trustee manages the investments, ensures the funds are used only for education expenses, and distributes money to pay for tuition and books according to the trust's terms. Charitable Trust A wealthy donor establishes a charitable trust to support environmental causes. The trustee evaluates grant applications, manages investments, and makes distributions to qualified environmental organizations while ensuring compliance with tax laws and trust terms. Business Succession Trust A business owner creates a trust to hold company shares for smooth succession planning. The trustee manages the business interests, ensures proper governance, and distributes profits according to the trust agreement while preparing for eventual transfer to the next generation.