Trustee is a legal term for 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.
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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 them 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. Corporate trustees, typically trust departments at large banks, often have very narrow duties, limited to those explicitly defined in the trust indenture.
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.
The term trustee is also applied 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.
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.
(USA) 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 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 or Town Council.
In states like Missouri, small villages have a Trustee
instead of a Mayor who is elected to manage
village business in a similar function.
Trustee, more frequently spelled trusty, is a term used for a prison inmate who has special work-related privileges, usually as a result of good behavior.
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. ยง 541.) For all bankruptcies (consumer or business) filed under Chapter 7 or Chapter 13 of Title 11 of the United States Code (the Bankruptcy Code), a trustee (the "trustee in bankruptcy" 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 or 12, 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."
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