Every trust must have a trustee to properly administer the elements of the trust. Trustees can be individuals, financial institutions or even organizations.
A trustee follows the precise instructions of the trustor (or the trustor's authorized representative), and also adheres to rules imposed by law.
Prudent Person Rule
Trustees are subject to the "prudent person" rule. This rule states that trustees should use the same standard of care and diligence that any sensible person would use in managing property. Additionally, a trustee should make a strong effort and utilize all of his/her skills in caring for the trustor's property.
A trustee has the duty to accomplish the following:
- Administer internal affairs
- Manage property
- Invest property
- Distribute income and principal
- Deal with beneficiaries impartially
- Use discretion over the important areas of the trust
A trustee has a fiduciary duty to the trust's beneficiaries as well as to the trustor. In dealing with beneficiaries, a trustee should:
- Use property only for the beneficiaries' interest
- Disclose important facts
- Provide additional information related to the trust upon request of the beneficiaries
A trustee should not:
If a trustee is suspected of improper activity or misuse of his/her discretionary decision-making powers, the court will review the trustee's actions after a petition is filed by the trustor or any beneficiary. A trustee may also petition the court for a review if beneficiaries question his/her decisions.
- Use trust property for personal benefit or purposes not related to the trust
- Acquire interests in conflict with those of the beneficiary
- Sell property to himself/herself
- Delegate his/her duties to another individual
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