trustee

   

Definition

Person or organization (such as a trust company) named intrust agreement by the trustor or a court (the first party) as a trusted third party to nominally own, and protect andhandle, trust-property for the benefit of one or morebeneficiaries (the second party) in accordance with theterms of the trust agreement. He or she is usually charged with investing trust property prudently and productively, and (unless specifically prohibited) can lease, mortgage, orsell it if deemed necessary in fulfillment of the trust'sobjectives. A trustee can be removed and replaced on courtorders but, after accepting trusteeship, he or she may not delegate, renounce, or resign his or her responsibilityunless an acceptable successor consents as being thereplacement. The capacity to be a trustee exists only where there is a capacity to hold or take property, therefore aminor or a person of unsound mind is not acceptable as a trustee. The maker of a trust (trustor) may also be its trustee and/or its beneficiary, but a sole trustee cannot be a sole beneficiary. Although a trustee is legally barred from benefiting from the trusteeship, usually a compensation is allowed in the trust agreement. But he or she cannot commingle personal funds that of the trust and cannot enter into any transaction with the trust. Otherwise thestatute of frauds is applied and the fairness or the good-faith nature of the transaction is generally not accepted as a defense. A trustee may also have reporting requirementson the activities and status of the trust and allcorrespondence regarding the assets is directed to the trustee. He or she is discharged of the duties of the trusteeship only when the intention or the purpose of the trust is fulfilled.