IntroductionA trust refers to an arrangement whereby trustees hold property of the beneficiaries. It is referred to as a being “an equitable obligation binding a person called a trustee” (Lawrence, 2001). A trust can be enforced by a beneficiary whether or not he/she is not a part of a trust.
A trustee has full title of the trust unlike an agent since agency is based on agreement. Many people prefer trusts to agencies since they are inexpensive to set up and the employees have full participation in the administration of the scheme. A trustee is therefore a person who is responsible for holding other peoples property and act in the interest of others rather than his/her won.Duties of a trusteeThe trustees therefore have certain duties imposed on them that they should carry out on behalf of other people.
They also have restrictions that govern them on what to do. One of these duties is known as fiduciary duties. This duty states that a trustee should not use the trust for his/her own benefits. It also gives the trustee duty not to delegate the trust.
The trustee has the duty to act unanimously. Unless the trust deed has stated otherwise, all trustees have the duty to make all the decisions binding the trust. In cases where the majority decision wins, the decision should bind the minority (Huston, 1999).The trustees have the duty to keep proper accounts.
In this case, the beneficiary should be allowed to inspect the documents. The trustee should update the beneficiary on the beneficiary information. This information may be on the investments and any dealings to do with the property of the trust. The beneficiary should therefore have access to all documents in the trust since in real sense he/she is the owner of the trust.
However, this duty has many practical limits and can not be exercised in expense of the trust. In many cases, the beneficiaries are given only limited access to the documents.The trustee has the duty to act in the beneficiaries’ best interest. He/she should prioritize the interests of the beneficiaries other than that of the other people and his own.
The trustee should therefore carry the duties of the trust according to the terms stated in the trust deed. He/she should not delegate the trustee’s duties to another person. However, this duty is not limited to experts who are required to assess the performance of the trust. The trustee should carry out the duties of the trust with skill and handle the assets of the trust with care.
A trustee has the duty to possess, protect and preserve the property of the trust. In cases where there are people challenging the validity of the trust, the trustee has the duty to do whatever way to defend it. The trustee should not mingle own property with those of the trust. He should set aside the trust property and separate it from his own property.
In cases where the trustee comingles the trust property with his, he is reliable for any losses that can occur in the business. The trustee should act in a prudent and sensible manner and make the trust property productive.He trustee has the duty to act wisely when dealing with the trust property and especially when selling, acquiring and management of the trust property. The trustee should treat all the beneficiaries in a fair manner.
He should not favor one beneficiary over another. In cases where he does not carry out his duties in a fair manner, he is reliable for any harm against the beneficiary. For instance, in the cases of a life interest trust, “The trustee should strike a fair balance between immediate income return for the life of the tenant and capital growth for the beneficiaries after the tenant’s death” (Oerton, 1999).A trustee is allowed to get advice from any suitable professional however should be specially considered before being put into account.
The trustee is therefore reliable for any breach of the trust and will not have any recourse.According to Soponsky, a trustee is responsible to pay to the correct income to the beneficiaries. He should also make sure that the distribution of the property to the beneficiaries is done in a fair way. This duty however has limitations in cases where there are exceptions in the trust deed.
A trustee has the right to invest any funds. This includes annual review of the trust funds. However, this duty should be exercised with care and skill and the person responsible should be a prudent and professional person.The trustee should be careful when exercising their powers as a trustee.
According to section 1 of the trustee act, a trustee should exercise skill and care when dealing to the property of the trust. He/she should have special knowledge and experience when carrying out his duties. A trustee who acts in a dishonesty manner can be relieved of his duties by the court. But in many cases, the trust deed can relieve the trustee of any liabilities.
A trustee should act willingly without expecting any reward in return for the services provided. He/she is not supposed to charge for the services provided, unless it is a professional trustee.Powers of a trusteeA trustee deed gives powers to trustee so that they can carry out their duties without any disturbances. This relieves them of the problems that may get when dealing with statutory or common law powers that have many limitations are often inadequate.
The trustees have the power to advance capital to the beneficiary. This is stated in the section 32 of the trustee act. This power enables them to be able to advance almost half of the beneficiary’s presumption entitlement to them early. In Section 31 of the trustee act of 1925, the trustees are given the power to distribute income to the beneficiaries.
In cases where the beneficiary is a minor, that is, under the age of eighteen years, the trustee has the power to use this income for educating and taking care of the minor. In cases where no cost are involved, the income is saved till the minor reaches the age of 18 and can decide what to do with it. A trustee is also given the power to delegate. However, this should be clearly stated in the trust deed.
In normal cases, the trustee should not delegate his duties and powers to any other person. This rule therefore applies in two situations.The first on is through the appointment by the attorney general. This has been stated in section 25 of the trustee act of 1925.
The person to be appointed should not be any other trustee however. The appointment period is not more than twelve months making this power limited. The other case is defined in the trustee act which allows for the appointment of a manager whose main duty is to look after the investment of the trust fund. Other cases may be delegation of a duty to an expert or a professor who will want to do an investigation on the operations of the trust.
The trustees are also given the power to invest in the trust fund. In this case, the trustee should consider the duty of care. This sates that the trustee should care for the assets of the trust and not be after personal benefits. The trustee should therefore ensure that he/she preserves the trust funds through investment and not go for speculative growth instead.
The trustee should appoint a professional advisor to help in the investment project. Failure to do so would mean that the trustee has the necessary skill and expertise to decide on the investment on his own. However, the trust should not delegate all the authority but should instead ensure that the performance of the advisor of investment manager is well monitored.Legal restrictions on trustsThere are many restrictions on the trusts by law.
For instance, trusts should be formed in order to benefit the specified beneficiaries. Formation of trusts that do not consider the interests of the beneficiaries is therefore not allowed by law. For instance, formation of a trust whose main aim is to teach several things such as catering or foreign languages is not allowed since the beneficiaries do not gain anything from such. However, this rule is limited to charitable trusts whose main function is to help and not benefit the beneficiaries.
These charitable trusts would include charity walks or organizations that deal with sponsors.There is also the rule against perpetuities which is divided into two sections. The first section is the common law against perpetuities. This law states that trust property should not be held in trust forever.
This means that the property should be given to the beneficiary in the long run. This rule eliminates cases where trusts remain in hold on the property and the property can not be sold or purchased. This rule states that “all property held on trust must vest within twenty one years of the death of a specified live/lives in being, otherwise the trust is void”This rule has however raised many issues since in some cases, if the trust property does not vest within the specified period of twenty one years, the trust would be referred to as being void. The common law however allows the holding of property for a maximum of 100 years.
Again, the common law does not specify any person as being ‘life in being’ since their deaths can not be ascertained by the trustee. An in cases where there is no person specified as a ‘life in being’, the property should vest within the first 21 years of the creation of the trust.The other limitation is on the statutory law against perpetuities. The common law rule ended up creating so many problems such that many Australian states introduced laws which acted as alternatives to be use by the public.
For instance, the 21 year rule was replaced under section 101 of property law act which extends the period of property vesting to eighty years from the commencing date of the trust. This has brought a big contradiction with the common law rule and is therefore only used in intervivos trusts. The common law still remains to be used in testamentary trusts.The last rule is on provisions that are illegal and contradict with the public interest.
Many trusts have been terminated by the law courts as they are seen to have an effect to the public. Many clauses and especially those that affect the social and cultural practices of the people are considered as being void. An example is a clause that would restrict the even distribution of property between siblings. The court of law therefore has the powers to dispute such trusts despite them being stated by the trustee since they are contrary and are considered as being illegal by the public (Hernandez,2000).
ConclusionA trustee is anyone who holds the property of the beneficiary. The trustee has been given duties that help him/her carry out the operations of the trust accordingly. These duties include right to invest, fair distribution of property, listening to the needs and interests of the beneficiary and many more. In order to carry out the duties effectively, the trustees have been given certain powers.
These include power advance capital to the beneficiary, power to control the income of a minor and also the power to carry out any investment. The trustee basically controls all the operations of a trust and therefore his responsibilities can never be undermined. ReferencesAvedis Donabenian (1996). Formation of trusts.
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