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What are the duties of a Trustee?

The powers of a Trustee are variable. The grantor of the trust can determine the extent of the Trustee's powers in the trust agreement or in the will. The Trustee must thoroughly understand what his or her duties are that accompany the title of legal owner of the trust assets. The duties of a Trustee may vary from state to state, but in general, a Trustee's duties include the following:

  1. The Trustee has a duty to carry out the trust in accordance with the terms of the trust or will.
  2. He has a duty not to delegate the Trustee's duties to another person-any duty which calls on him to exercise skill and judgment can't be delegated, such as investment responsibilities. This duty does not prohibit him from hiring professional experts to evaluate the investments for their suitability to the trust.
  3. He has the duty to exercise a reasonable degree of skill and care when managing the trust assets.
  4. He owes a duty of loyalty to the beneficiaries to administer the trust solely in their best interests, and put aside his own self-interests.
  5. He has a duty to possess, protect, and preserve the trust property. He must also defend the trust and the beneficiaries against anyone who would challenge the validity of the trust.
  6. He has a duty to separate and set aside the trust property and is required to keep the trust property separate from his own property. If the Trustee should co-mingle his property with the trust's property, he is liable for any losses that could result from the co-mingling.
  7. He has a duty to make the trust property productive. He must act in a prudent or sensible manner when it comes to investing, acquiring, selling, and managing the trust property.
  8. Finally, the Trustee has the duty to treat all of the beneficiaries impartially. He must not favor one beneficiary over another. If he is unable to remain impartial, and exercise his Trustee duties in good faith, he may be liable for any harm against the beneficiary.

A trustee is under a continuing duty to administer the trust at a place appropriate to the purposes of the trust and to its sound, efficient management. If the principal place of administration becomes inappropriate for any reason, the court may enter any order furthering efficient administration and the interests of beneficiaries, including, if appropriate, release of registration, removal of the trustee and appointment of a trustee in another state. Trust provisions relating to the place of administration and to changes in the place of administration or of trustee control unless compliance would be contrary to efficient administration or the purposes of the trust. Views of adult beneficiaries shall be given weight in determining the suitability of the trustee and the place of administration.

The legal principles involved in the law of Trusts are becoming important to more and more people, as trusts have become more popular in personal estates and tax planning, business, investments, employee benefits, and not for profit and charitable organizations.

A trust can arise whenever a person has legal title to property (the trustee) and the law recognizes that another person (the beneficiary) has ownership rights to the property. Trusts can be imposed by courts to provide a legal remedy to persons involved in lawsuits. These are called trusts arising by operation of law.

Trusts are also commonly created by written documents such as Wills, Trust Declarations, Trust Agreements or Settlements and pension, or health and welfare trusts. These are express trusts.

There are long established principles which establish the obligations and duties of persons who find themselves in the position of a Trustee.  Volumes have been written and continue to be written about this subject. The following is a very brief summary intended to provide a general outline.  Each real life situation has specific facts, and legal expertise is required to provide advice on whether or not specific actions should be taken if you are a Trustee.


DUTY OF LOYALTY

A Trustee must put the interests of the beneficiary ahead of his or her own interests. The following list details some of his or her specific duties and obligations.

Obligation to perform trust duties personally
Obligation to act impartially on behalf of all beneficiaries of the Trust
Duty to invest the trust assets
Duty to keep trust property separate from the Trustees own property
Duty to provide financial accounting to the beneficiaries;
Duty to provide information
Duty to act honestly and diligently
Duty to avoid conflict of interest and to obtain no profit from the position as trustee

A breach of trust takes place whenever a trustee fails to fulfill his or her duties or obligations as a Trustee, regardless of whether the breach is innocent, negligent or fraudulent.

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