WHAT DO YOU KNOW ABOUT TRUSTEES AND BENEFICIARIES?
Many questions have been asked as to who or what a trustee or beneficiary is, why they are appointed, and the roles they play in a trust relationship.
Before we can understand what a trustee and beneficiary relationship means, we need to know what a Trust relationship is.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a settlor, who transfers property to a trustee. The trustee holds that property for the trust’s beneficiaries.
Trusts are frequently created in wills, defining how money and property will be handled for children or other beneficiaries.
The trustee is given legal title to the trust property, but is obligated to act in good faith towards beneficiaries. The trustee may be compensated and have expenses reimbursed. A trustee most also turn over all profits from the trust properties.
Trustees who violate this fiduciary duty can be ordered by the courts to reverse their actions. An order can also be given that all squandered profits be returned, or other sanctions can be impose.
The trustee may be an individual, a company, or a public body. There may be a single trustee or multiple co-trustees. The trust is governed by the terms under which it was created.
In these circumstances, the trustees will be able to act only within the bounds of instructions given by the settlor. Sometimes, this requires a contractual trust agreement or deed.
Trustees have the most significant role to play in the actual running of the trust. These trustees do not actually own the assets that are placed in trust. These remain the property of the owner of the trust property itself until they are ultimately transferred to the beneficiary.
However, these trustees are charged with ensuring that the assets are managed, to ensure that the beneficiaries derives maximum benefit. This might be achieved through investment, or simply ensuring that the assets are kept safe.
Beneficiaries on the other hand have very few obligations as a result of their involvement with the trust.
In most cases the beneficiary will be precisely defined in the trust instrument. That is, the document through which the trust is established.
Sometimes, the settlor will have outlined a class of beneficiary, rather than a specific individual. In some cases the trustees will be required to decide precisely who will benefit from the trust.
There are however is no legal requirement for the settlor, trustee and beneficiary to be different people or organizations. It is possible for an individual or settlor to establish a trust where the trustee and beneficiary is the same person.
It is also possible for the settlor to become one of several trustees. This means to appoint him or herself, along with others. The benefit of this is, it offer peace of mind for all parties involved.
A lawyer can also act as a trustee of a trust property.
This has benefits. As a trustee, the lawyer will not have the same emotional ties to the beneficiaries as a family member might. This allows the lawyer to make impartial decisions with which a more emotionally-involved individual might struggle to make.
