Legal Definitions - trustee

A trustee is an individual or organization legally appointed to manage assets or property that have been placed into a trust. Their primary responsibility is to hold legal title to these assets and administer them strictly for the benefit of the trust's designated beneficiaries, not for their own personal gain. Trustees are bound by the terms of the trust document, as well as by law, to act with the utmost care, loyalty, and impartiality. This includes making prudent financial decisions, keeping accurate records, and ensuring that trust assets are kept separate from their own personal finances. If a trustee is unable to continue their duties, a new trustee, often called a successor trustee, will be appointed to ensure the trust continues to operate as intended.

Here are some examples of how a trustee operates:

• Estate Planning for Minor Children: A couple with young children creates a trust in their will to hold their assets. They appoint their trusted sibling, Aunt Sarah, as the trustee. If the couple passes away, Aunt Sarah will be responsible for managing the inheritance, investing it wisely, and distributing funds for the children's education, healthcare, and living expenses until they reach a specified age, as outlined in the trust document. She must act solely in the best interest of her nieces and nephews, keeping detailed records of all transactions.

• Charitable Foundation: A wealthy philanthropist establishes a charitable trust designed to fund medical research for a specific disease. They appoint a reputable bank's trust department to serve as the trustee. The bank's trust department then manages the invested funds, ensuring they grow over time, and regularly distributes grants to research institutions according to the criteria set forth in the trust agreement. The bank, as trustee, has a legal duty to uphold the philanthropic mission and manage the assets responsibly for the long-term benefit of the charity.

• Special Needs Planning: A family sets up a special needs trust for their adult child with a disability to ensure their financial security without jeopardizing eligibility for government benefits. They appoint a professional trust company as the trustee. The trust company manages the funds, paying for supplemental needs like therapies, specialized equipment, or recreational activities that government programs do not cover. The trust company, acting as trustee, must navigate complex regulations and ensure the funds are used appropriately to enhance the beneficiary's quality of life while preserving their eligibility for other essential support.