A trust is a legal agreement between three parties, the grantor, the trustee, and the beneficiary. The trustee serves as the main driver of the trust as they are responsible for the daily administration of the trust. They are the ultimate decision-makers and must ensure that the trust adheres to its terms and purpose. Therefore, anyone who intends to create a trust must understand the crucial role that a trustee plays in their trust.
A trustee is a fiduciary agent who holds the legal title to the property on behalf of the beneficiary. The trustee has a legal obligation to manage, safeguard and distribute the trust assets in line with the terms and conditions of the trust. The trust deed outlines the scope and limitations of the trustee’s powers, which include:
1. Investment management – The trustee has the power to invest the trust assets in stocks, bonds, real estate, or other investments, as long as it is in line with the objectives and risk tolerance of the trust.
2. Asset protection – The trustee is responsible for protecting the trust assets from loss or damage resulting from fraud, theft, misuse, or other malicious activities.
3. Record-keeping and accounting – The trustee is required to keep accurate and complete records of all the assets, transactions, and beneficiaries of the trust. The trustee must also prepare and present regular statements of account to the beneficiaries.
4. Distribution of assets – The trustee must distribute the trust assets to the beneficiaries according to the terms of the trust. The trustee must ensure that the beneficiaries receive their entitlements at the right time and in the right amounts.
5. Management of disputes – The trustee has the authority to resolve conflicts that may arise between the beneficiaries or any other parties involved in the trust.
The role of the trustee is critical to the proper functioning of the trust. The trust deed outlines the responsibilities of the trustee, which include:
1. Loyalty – The trustee must act in the best interests of the beneficiaries at all times. They must not engage in activities that may conflict with the trust’s objectives or benefit themselves at the expense of the beneficiaries.
2. Prudence – The trustee must exercise reasonable care and diligence when managing the trust assets. They must ensure that the investment decisions are sound and the risks are reasonable.
3. Impartiality – The trustee must be fair and impartial when dealing with the beneficiaries. They should not show favoritism to any beneficiary and treat all beneficiaries equally.
4. Confidentiality – The trustee must maintain the confidentiality of the trust and its beneficiaries. They must not disclose any information about the trust or its beneficiaries to anyone without the beneficiaries’ consent.
5. Good faith – The trustee must act in good faith when performing their duties. They must be honest, trustworthy, and transparent in all their dealings with the beneficiaries.
The trustee must also ensure that the trust complies with legal, tax, and accounting requirements. They must keep up with changes in legislation and regulations that may affect the trust. The trustee must work closely with the trust’s legal and tax advisors to ensure that the trust remains lawfully compliant and tax-efficient.
In conclusion, the trustee plays a vital role in the proper functioning of a trust. They are responsible for the daily administration of the trust, investment management, asset protection, record-keeping, distribution of assets, and management of disputes. A trustee must be loyal, prudent, impartial, confidential, and act in good faith when performing their duties. Therefore, it is crucial to select a trustee who has the knowledge, expertise, and integrity needed to efficiently manage the trust.
