What is a trustee?
A trustee is the person or institution that holds legal title to trust property and manages it for the beneficiaries under the trust's terms.
A trustee is the person or entity that manages trust assets for beneficiaries.
Where the word "Trustee" comes from
Trustee comes from the Old Norse traust, confidence, via the English trust. The role is the fiduciary core of the trust relationship: the trustee manages property for others and is held to the highest standard of loyalty and care.
Why Trustee matters
The trustee's skill and integrity determine whether the trust succeeds. Trustees invest, pay distributions, keep records, file taxes, and follow the trust document, and they can be removed or surcharged if they breach their duties.
Common confusion about Trustee
A trustee does not own the property for themselves. The trustee holds it for the beneficiaries and must act in their interests, even when the trustee is also a beneficiary, so conflicts of interest must be disclosed and managed.
A real-world example of Trustee
A grandfather creates a trust for his grandchild's college costs and names a bank as trustee. The bank invests the funds conservatively, pays tuition directly to the school, and sends annual statements, following the trust's instructions and state fiduciary law.
A worked example of Trustee
A trust directs the trustee to distribute income to a beneficiary for life and the principal to a charity at death. The trustee must balance the income beneficiary's need for current returns against the charity's interest in preserving principal, invest prudently, and avoid self-dealing. If the trustee invests in a friend's risky venture that loses money, the beneficiaries can sue for breach of fiduciary duty and recover the loss from the trustee personally.
How Trustee works in practice
If you are asked to serve as trustee, know that you owe duties of loyalty, care, and impartiality, and keep meticulous records. Invest prudently, diversify, and document every decision. If you are appointing a trustee, choose an institution or person with the time and skill for the job, and name a successor, because an unfit or absent trustee can defeat the entire plan. A trustee should also read the trust document closely and follow its distribution provisions literally, because deviating from the stated terms, even with good intentions, can expose the trustee to a surcharge by the beneficiaries.
Questions about Trustee
Can I be my own trustee?
For a revocable living trust, yes, during your life.
Can a trustee be sued?
Yes, for breaching fiduciary duties.
Who picks the trustee?
The grantor names them in the trust document.