Trustee
Encyclopedia
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another. Although the strictest sense of the term is the holder of property on behalf of a beneficiary
Beneficiary (trust)
In trust law, a beneficiary or cestui que use, a.k.a. cestui que trust, is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often...

, the more expansive sense encompasses persons who serve, for example, on the Board of Trustees for an institution that operates for the benefit of the general public. A trust
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...

 can be set up either to benefit particular persons, or for any charitable purposes
Charitable trust
A charitable trust is an irrevocable trust established for charitable purposes, and is a more specific term than "charitable organization".-United States:...

 (but not generally for non-charitable purposes
Purpose Trust
A purpose trust is a type of trust which has no beneficiaries, but instead exists for advancing some non-charitable purpose of some kind. In most jurisdictions, such trusts are not enforceable outside of certain limited and anomalous exceptions, but some countries have enacted legislation...

): typical examples are a will trust
Testamentary trust
A testamentary trust is a trust which arises upon the death of the testator, and which is specified in his or her will...

 for the testator
Testator
A testator is a person who has written and executed a last will and testament that is in effect at the time of his/her death. It is any "person who makes a will."-Related terms:...

's children and family, a pension
Pension
In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...

 trust (to confer benefits on employees and their families), and a charitable trust. In all cases, the trustee may be a person or company
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...

, whether or not they are a prospective beneficiary.

General duties of trustees

Trustees have certain duties (some of which are fiduciary). These include the duty to:
  • Carry out the expressed terms of the trust instrument
  • Defend the trust
  • Prudently invest trust assets
  • Be impartial among beneficiaries
  • Account for actions and keep beneficiaries informed
  • Be loyal
  • Not delegate
  • Not profit
  • Not be in a conflict of interest position
  • Administer in the best interest of the beneficiaries

The terms of instrument that creates the trust may narrow or expand these duties—but in most instances they cannot be eliminated completely. Corporate trustees, typically trust departments at large banks, often have very narrow duties, limited to those the trust indenture explicitly defines.

A trustee carries the fiduciary responsibility and liability to use the trust assets according to the provisions of the trust instrument (and often regardless of their own or the beneficiaries' wishes). The trustee may find himself liable to claimants, prospective beneficiaries, or third parties. In the event that a trustee incurs a liability (for example, in litigation, or for taxes, or under the terms of a lease) in excess of the trust property they hold, they may find themselves personally liable for the excess.

Trustees are generally held to a "prudent person" standard in regard to meeting their fiduciary responsibilities, though investment, legal, and other professionals can be held to a higher standard commensurate with their higher expertise. Trustees can be paid for their time and trouble in performing their duties only if the trust specifically provides for payment. It is common for lawyers to draft will trusts so as to permit such payment, and to take office accordingly: this may be an unnecessary expense for small estates.

In an exception to the duties outlined above, sabbatical officer
Sabbatical officer
A sabbatical officer is a full-time officer elected by the members of a students' union , commonly at a higher education establishment such as a university...

s of students' union
Students' union
A students' union, student government, student senate, students' association, guild of students or government of student body is a student organization present in many colleges and universities, and has started appearing in some high schools...

s who are also trustees of these organisations they work for do have the right to a salary (and hence profit from their being a trustee). This is an exception explicitly granted in the 1993 act

Other uses

The broadest sense of the term trustee applies to someone held to a fiduciary duty similar in some respects to that of a trustee proper. For example, the directors of a bank may be trustees for the depositors, directors of a corporation are trustees for the stockholders and a guardian is trustee of his ward's property. Many corporations call their governing board a board of trustees, though in those cases they act as a board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...

.

In the case of UK charities
Charitable trust
A charitable trust is an irrevocable trust established for charitable purposes, and is a more specific term than "charitable organization".-United States:...

, a trustee is an unpaid volunteer who undertakes fiduciary responsibilities on behalf of the charity, subject to the provisions of Charity Law, a branch of trust law, and the Charities Act 1993. For charity trustees, the Charity Commission
Charity Commission
The Charity Commission for England and Wales is the non-ministerial government department that regulates registered charities in England and Wales....

  of England and Wales, Office of the Scottish Charity Regulator
Office of the Scottish Charity Regulator
The Office of the Scottish Charity Regulator is a non-ministerial department of the Scottish Government, with responsibility for the regulation of charities in Scotland...

 of Scotland and Voluntary Activity Unit of Northern Ireland often has concurrent jurisdiction with the Courts. Many UK charities are also limited liability companies
Limited company
A limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. And the former of these, a limited company limited by shares, may be...

 registered with Companies House
Companies House
Companies House is the United Kingdom Registrar of Companies and is an Executive Agency of the United Kingdom Government Department for Business, Innovation and Skills . All forms of companies are incorporated and registered with Companies House and file specific details as required by the...

, in this case the trustees are also Directors of the company and their liability is limited. This is the preferred model if the charity owns property or employs people.

The law on this in England changed considerably with the Charities Act of 2006. An account of the main changes can be found in "Charities Act 2006 A guide to the new law" by Michael King and Ann Phillips. One of the key changes made was that it introduced the Charitable Incorporated Organisation. This is basically a limited liability charity. There are thus now two main aspects of corporate management of charities. One is the traditional way in which a corporation is a corporate trustee of a given charity. The second is the new way, in which the charity itself is incorporated as a CIO. The advantages and disadvantages of the different methods is a complicated matter. According to King and Philips, many of the advantages of incorporating as a CIO are obtained if the trustees are not individuals but a corporate entity.

Local government in the United States

Depending on the state, a Trustee is a member of the Village Board of Trustees, which is a village's elected legislative body as outlined by local or state law. It can be composed of the Mayor
Mayor
In many countries, a Mayor is the highest ranking officer in the municipal government of a town or a large urban city....

 and a set number of Trustees and usually manages village property, finances, safety, health, comfort, and general welfare and leadership of the town (acting as a Board of Police or Fire Commissioners or a Moderate Income Housing Board for example). Village Board of Trustees is comparable to but distinguished from City Council
City council
A city council or town council is the legislative body that governs a city, town, municipality or local government area.-Australia & NZ:Because of the differences in legislation between the States, the exact definition of a City Council varies...

 or Town Council
Town council
A town council is a democratically elected form of government for small municipalities or civil parishes. A council may serve as both the representative and executive branch....

. Small villages have a Trustee instead of a Mayor who is elected to manage village business in a similar function.

In some states, a civil township
Civil township
A civil township is a widely used unit of local government in the United States, subordinate to, and geographic divisions of, a county. Specific responsibilities and the degree of autonomy vary based on each state. Civil townships are distinct from survey townships, but in states that have both,...

 may be administered by a trustee or a group of trustees; see Indiana Township Trustee for an example.

Bankruptcy Trustee

In the United States, when a consumer or business files for bankruptcy all property of the filer becomes property of a newly created entity, the "bankruptcy estate." (See 11 U.S.C. § 541.) For all bankruptcies (consumer or business) filed under Chapter 7, 12 or 13 of Title 11 of the United States Code (the Bankruptcy Code), a trustee (the "trustee in bankruptcy
Trustee in bankruptcy
A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate.- United States :In the United States, a Trustee in Bankruptcy is a person who is appointed by the United States Department of Justice or by the creditors involved in a bankruptcy case.In a...

" or TIB) is appointed by the United States Trustee, an officer of the Department of Justice that is charged with ensuring the integrity of the bankruptcy system and with representatives in each court, to manage the property of the bankruptcy estate, including bringing actions to avoid pre-bankruptcy transfers of property. In bankruptcies filed under Chapter 11, the debtor continues to manage the property of the bankruptcy estate, as "debtor in possession," subject to replacement for cause with a trustee.

Chapter 7 trustees in bankruptcy are chosen by the United States Trustee from a panel, and are known as panel trustees. Every judicial district has a permanent Chapter 13 trustee, known as a "standing trustee." As cases under Chapter 12 (for family farmers or fishermen) are filed fairly infrequently, the United States Trustee usually makes trustee appointments in such cases on an ad hoc basis.

UK legislation

Trustee Delegation Act 1999 specifically covers matters to do with land
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...

.
Trustee Act 1925
Trusts of Land and Appointment of Trustees Act 1996
Trusts of Land and Appointment of Trustees Act 1996
The Trusts of Land and Appointment of Trustees Act 1996 is an Act of Parliament of the United Kingdom, which altered the law in relation to trusts of land in England, Wales, Scotland and Northern Ireland.-Background:...

Trustee Act 2000
Trustee Act 2000
The Trustee Act 2000 is an Act of the Parliament of the United Kingdom that regulates the duties of trustees in English trust law. Reform in these areas had been advised as early as 1982, and finally came about through the Trustee Bill 2000, based on the Law Commission's 1999 report "Trustees'...

Charities Act 1993

See also

  • Trustee model of representation
    Trustee model of representation
    The trustee model of representation is a model of a representative democracy. Constituents elect their representatives as 'trustees' for their constituency. These 'trustees' have sufficient autonomy to deliberate and act in favor of the greater common good and national interest, even if it means...

  • Trusty system
    Trustee (disambiguation)
    Trustee is a legal term for a holder of property on behalf of a beneficiary. Trustee, trusty, trustees, trustee system, trusty system, and related terms and phrases containing the homophones "trustee" or "trusty" or the plural forms of these two words, refer to a very wide variety of disparate...

  • Trustor
    Trustor
    * In law a trustor is a person who settles property on express trust for the benefit of beneficiaries. See settlor.* In social sciences and in information technology, trustor is an entity that trusts the other entity...

  • Charity Trustee
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK