Business Law - Trustees of A Business Trust - Shashank

Trustees of a Business Trust (ID: 31960747-13a0-4a99-8865-54b691d15290)
/trʌsˈtiːz ɒv ə ˈbɪznɪs trʌst/ | Noun
Definition: A trustee is a person or a company that carries out a business on the behalf of
the members of the trust or it’s beneficiaries. The trustee is legally responsible for any debts
of the trust and if needed can sell the trust’s asset to pay the debts back.
Overview
A business trust unlike a corporation has no legal recognition as a business trust does not
receive a charter from the state. The purpose of a business trust is to firstly mimic the
limited liability characteristic of a corporation while at the same time to in a way circumvent
the imposed restriction on the corporation with respect to real estate development and
corporate acquisition. The trustees although irrespective of the trust being business or
otherwise receive legal title to the assets to use the asset for the benefit of the trust and
beneficiaries.
Appointment of a Trustee
Members of the trust appoint a trustee for smooth and efficient administration of the trust
either as an individual or a corporation. In addition to being fiscally astute, trustees must be
chosen for their ability to exercise strong, prudent and fair judgement so that the members
of the trust and the beneficiaries alike are confident of the trustee’s/s’ ability to efficiently
administer the trust. Although, the statutory fees generally is not expressly mentioned in the
documents of establishment of the trust but, if there is an intention or desire to not pay the
statutory fees to a trustee, such intention such be mentioned in the documents establishing
the trust. Trustee/s can be appointed at any time after the establishment of the trust.
Trustees on behalf of the trust receive a legal right to the property and assets of the trust in
pursuance to which a trustee is empowered to act on the trust’s behalf for the benefit of the
members and the beneficiaries of the trust. As far as the definition of property of trust is
concerned, the definition includes every asset of monetary value including money owned by
or in the trust’s name. The definition can also include if any, copyrights, patents or any
intellectual property for that matter.
Key Takeaways
Trustees are responsible for efficient administration of a trust which must benefit the
members and the beneficiaries. Trustees are entitled to the trust’s property, which the
trustee can use to benefit the members or beneficiaries or the clear any debts.
Roles
When a trust is created, a grantor while appointing a trustee expects the trustee to be
prudent in judgement and perform the following functions:
1. The trustee must be able to delegate within reason the trust’s assets and in
addition to this a trustee is also expected to make calculated investment
decisions related to the trust assets.
2. The trustee after adequate circumspection must be able to allocate the trust’s
assets to benefit the beneficiaries.
3. The trustee must necessarily perform the basic administrative functions of a
trust.
4. The trustee must at all times act in accordance to the with the documents of
trust so long as the terms governing the documents are not against the law.
5. The trustee must keep the beneficiaries and state agencies be it federal or state
informed through periodic reports.
Key Takeaways
In addition to performing key administrative functions the trustee must make reasonable
decisions regarding the investment and allocation of the trust assets which yield benefit for
the members and the beneficiaries.
The trustee must ensure that the actions that the trustee takes are in accordance with the
guidelines and the terms of the trust document.
Duties and Liabilities
After the appointment of the trustee, the grantor or settlor transfer the legal title to the trust
property to the trustee. In pursuance to the transfer of the legal title, the trustee now has a
fiduciary duty to the trust members and the beneficiaries. Any breach of the fiduciary duty
will render the trustee personally accountable. The trustee under no circumstances can
compromise the trustee’s loyalty, impartiality and the trustee’s ability to exercise reasonable
care towards the beneficiaries of the trust. The trustee must uphold and abide by the duties,
until and unless the trust becomes passive and the legal title passes on to the beneficiaries.
The trustee also has an inherent responsibility to pay taxes on the income generated by the
assets of the trust through income or estate taxes. In accordance with the Form 1041 the
Internal Revenue Service, trusts must file income tax returns every year to report and
record the capital gains and losses.
Key Takeaways
Once the legal title to the trust assets resides with the trustee, the trustee must uphold the
fiduciary duties to the beneficiaries which include a duty to loyalty, reasonable judgement
and impartiality. The trustee will be personally liable for breach of the fiduciary duties.
It is also the trustee’s responsibility to file for annual tax returns to record the capital gains
and losses on the trust property and assets.
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Trustees of a Business Trust (ID: 31960747-13a0-4a99-8865-54b691d15290)

Duties and Liabilities

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