Trusts and Estate Planning: Trust Elements - Trustee
A trust has five main elements. First, a settlor transfers some or all of his or her property. Second, the property transferred by the settlor is designated trust property. Third, the trust property designated by the settlor is transferred with the settlor's intent that it be managed by another. Fourth, the trust property designated by the settlor is transferred for management by a trustee. Fifth, the trust property designated by the settlor is managed by a trustee for the benefit of a beneficiary. This article discusses some aspects of the element of a trustee.
A trust is managed by a competent trustee. A competent trustee may be an adult capable of managing his or her own property. A competent trustee may also be a legal entity with the power to serve as a trustee (typically, a bank or trust company). In many states, the trustee must be a resident of the state in which the trust will be administered.
More than one person may be trustee. Such persons are known as co-trustees. One trustee may be followed by another person serving as trustee. A trustee serving after the named or original trustee is known as a successor-trustee.
No Named Trustee or Notification Required
A settlor is not required to name a particular person or legal entity as trustee. If the settlor has manifested the intention to create a trust, a trustee may be appointed by a court. If the named trustee cannot serve as trustee, a trustee may be appointed by a court.
In order to create a trust, the named trustee need not be notified. If the named trustee refuses to serve, a trustee may be appointed by a court.
The trustee holds the legal title to property transferred to the trust. The trustee is entitled to the ownership documents for the trust property and has the power to transfer trust property.
A trustee can engage in those acts permitted by the wording of the trust, and in those acts implied by those words and the existence of the trust. Indeed, a trustee is a trusted personal legal representative, a fiduciary, of the trust. As a fiduciary, the trustee has special duties and responsibilities. A trustee may be required to post a bond to reimburse any interested person damaged by any failure of the trustee to perform his or her duties faithfully.
After accepting the duties of a trustee, a trustee generally cannot resign without court permission, unless the trust provides otherwise. A trustee is entitled to reasonable compensation for his or her services to the trust.
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