trustee

  

Definition

Person or organization (such as a trust company) named in trust agreement by the trustor or a court (the first party) as a trusted third party to nominally own, and protect and handle, trust-property for the benefit of one or more beneficiaries (the second party) in accordance with the terms of the trust agreement. He or she is usually charged with investing trust property prudently and productively, and (unless specifically prohibited) can lease, mortgage, or sell it if deemed necessary in fulfillment of the trust's objectives. A trustee can be removed and replaced on court orders but, after accepting trusteeship, he or she may not delegate, renounce, or resign his or her responsibility unless an acceptable successor consents as being the replacement. The capacity to be a trustee exists only where there is a capacity to hold or take property, therefore a minor 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 the statute 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 requirements on the activities and status of the trust and all correspondence 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.

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