What is a Trustee?

Published by Thomas Herold in Investments, Laws & Regulations, Real Estate, Retirement

'Trustee' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Trustee refers to either a firm or an individual who possesses assets or real estate property on behalf of a third party individual, group, or organization. Trustees are often appointed to perform a great range of functions. These could be for charities, bankruptcies, trust funds, pension plans, or retirement plans.

As the name implies, these individuals or firms are entrusted with taking the optimal decisions which are in the primary interest of the beneficiary. Because of this sacred trust, these are often considered to be fiduciary responsibilities for the beneficiary or beneficiaries of the trust in question. This means that they are legally bound and obligated to perform these duties to the very best of their capabilities.

The granting of the prestigious title and responsibilities of trustee comes in the form of a legal title bestowed by a trust. Trusts themselves prove to be legal arrangements which two willingly consenting parties agree to make. Because of the fiduciary nature of the trustee role in any trust which the individual or organization oversees for the beneficiary or beneficiaries, they must lay aside any and all hopes of individual gain or personal agendas so that they can perform the best actions on behalf of the trust.

In other words, the trustee carries the full responsibility for correctly and optimally managing both the financial assets and real estate types of property which the trust itself possesses. There will always be duties particular to the specific details of the trust which the trustees must perform. The differing types of assets will naturally dictate the activities which the trustees must engage in for the beneficiaries’ common good.

It helps to consider a real world example to more fully understand the somewhat complex concept. When trusts are made up of a range of real estate properties, the trustees will be responsible for properly overseeing the maintenance and handling of the particular pieces of property. In other cases, a trust might be comprised of different investments such as stocks, mutual funds, and bond holdings in a stock brokerage firm account. The trustees in this case will have to properly oversee and mange as necessary the account or accounts for the beneficiaries.

Trustees also have certain guidelines to which they must adhere in general. Among these common responsibilities which pertain no matter what the particulars of the trust agreement may actually be, the assets must be at all times kept under the direct control of the trustees so that they are securely accounted for each and every day. Trustees also must fully grasp the often unique terms of their particular trust, the responsibilities they are incurring by taking on the role, and the wishes of the applicable beneficiaries. Assets which may be invested must be considered productive so that they will benefit the beneficiary or beneficiaries in the future.

Besides this, the trustees have to both understand and properly interpret the trust arrangement so that they can effectively administer the assets’ distribution to the correct parties and/or beneficiaries. This includes the duties of compiling all appropriate records for the trust. Among these there will be tax returns which they must file and pay and statements that they must produce and deliver to the beneficiaries. As such, the trustees will be expected to maintain regular communication with all beneficiaries so that they remain informed of the value of related accounts and any taxes which will become due.

In the end, all trustees have the distinction of being the ultimate decision makers regarding every trust-related matter. They must make such decisions according to the particular provisions contained within their unique trust arrangement and contract. It also means that if beneficiaries have questions regarding a decision which the trustee is preparing to take, that they must first obtain answers for these beneficiaries before they engage in the given decision.

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The term 'Trustee' is included in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.