User Contributed Dictionary
Pronunciation
Noun
trustees- plural of trustee
Extensive Definition
Trustee is a legal term
that refers to a holder of property on behalf of a beneficiary.
A trust
can be set up either to benefit particular persons, or for any
charitable
purposes (but not generally for non-charitable
purposes): typical examples are a will
trust for the testator's children and family,
a pension trust (to
confer benefits on employees and their families), and a charitable
trust. In all cases, the trustee may be a person or company, whether or not they are
a prospective beneficiary.
General duties of trustees
In virtually every common law jurisdiction,
trustees have certain duties (some of which are fiduciary). These
include the duty to carry out the express terms of the trust
instrument, the duty to defend the trust, the duty to prudently
invest trust assets, the duty of impartiality among the
beneficiaries, the duty to account for their actions and to keep
the beneficiaries informed about the trust, the duty of loyalty,
the duty not to delegate, the duty not to profit, the duty not to
be in a conflict of interest position and the duty to administer
the trust in the best interest of the beneficiaries. These duties
may be expanded or narrowed by the terms of the instrument creating
the trust, but in most instances cannot be eliminated
completely.
Benjamin Cardozo once described the standard for
fiduciary behavior this way: "Not honesty alone, but the punctilio
of an honor the most sensitive, is then the standard of behavior."
Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928).
Necessary traits of trustees
The responsibilities of a trustee can be onerous, although honest trustees are normally indemnified out of the trust assets. 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. Thus, at least in theory, a member of a small charity committee could unwittingly risk their family assets.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 the case of charitable or other trust
corporations, the company itself is a trustee and the term "Trustee
Board" is frequently used of the board of
directors. The company holds the trust property and liabilities
separately from the individual trustee-directors, and confers
limited liability on them. The members of the board are generally
known as trustees, although they remain liable as directors under
company law, and as directors are naturally responsible for their
acts and omissions in directing the charity. For practical
purposes, the members of the board perform the duties of trustees,
but the powers of the charity are delegated and exercised subject
to the charity's procedural articles or regulations.
Other uses
Many other corporations call their governing boards a board of trustees, though in those cases, they act as a board of directors. To some extent, the fiduciary duties of a director to the company are comparable with those of a trustee.In the case of UK charities,
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 of England and Wales,
Office of the Scottish Charity Regulator of Scotland and
Voluntary
Activity Unit of Northern Ireland often has concurrent
jurisdiction with the Courts. Many UK charities are also limited
liability companies registered with Companies
House, 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.
Trustee is also a term used for a prison inmate
who has special work-related privileges, usually as a result of
good behavior.
Bankruptcy Trustee
In the United States, if a person is adjudged a bankrupt, a trustee will be appointed to hold legal title to the property of the debtor and to perform other duties required by the bankruptcy laws. See United States Trustee for additional information about trustees in US bankruptcy law.UK legislation
- Trustee
Delegation Act 1999 specifically covers matters to do with
land.
- Trustee Act 1925
- Trusts of Land and Appointment of Trustees Act 1996
- Trustee Act 2000
- Charities Act 1993
- Trustee Act 1925