Rights of trustee: Overview, definition, and example
What are the rights of a trustee?
The rights of a trustee refer to the legal powers and privileges granted to the individual or institution acting as the trustee of a trust. Trustees are responsible for managing the assets and affairs of a trust on behalf of its beneficiaries. These rights enable trustees to fulfill their fiduciary duties and carry out the terms of the trust agreement.
The rights of a trustee typically include the ability to manage, invest, and distribute the trust’s assets, as well as the authority to make decisions about the trust in accordance with the terms set forth in the trust document. Trustees also have the right to seek professional advice and assistance when necessary and are entitled to be compensated for their services, provided this is stipulated in the trust agreement.
Why are the rights of a trustee important?
The rights of a trustee are important because they empower the trustee to effectively manage and protect the assets of the trust, ensuring that the beneficiaries' interests are met. By clearly defining these rights, the trust agreement provides guidance on how the trustee should carry out their responsibilities. The rights also serve to safeguard the trustee’s authority to make decisions, take actions, and manage assets in a way that benefits the trust and its beneficiaries.
For beneficiaries, understanding the trustee’s rights helps ensure that the trustee has the necessary authority to act in their best interests. For trustees, knowing their rights ensures they can execute their duties properly and have the support they need to perform the role effectively.
Understanding the rights of a trustee through an example
Imagine a family trust that is set up to manage assets for several children after their parents' passing. The trustee, appointed to manage the trust, has the right to access the trust’s assets, make investment decisions, and distribute the funds to the beneficiaries as needed according to the terms of the trust agreement.
For instance, the trustee may decide to sell a portion of the trust’s real estate holdings to generate cash for the beneficiaries. They have the right to make this decision, provided it aligns with the trust’s objectives and the instructions laid out in the trust agreement.
In another scenario, a trustee of a charitable trust may be authorized to invest funds in a variety of financial instruments, with the goal of growing the trust’s assets. The trustee can make these investment decisions, provided they act in the best interest of the charity and follow the trust’s instructions regarding the types of investments to make.
An example of a trustee's rights clause
Here’s how a rights of trustee clause might look in a trust agreement:
“The Trustee shall have the right to manage, invest, and distribute the assets of the Trust in accordance with the terms set forth in this Agreement. The Trustee may, at their discretion, seek professional advice and assistance for the administration of the Trust. The Trustee is entitled to reasonable compensation for services rendered, as outlined in this Agreement.”
Conclusion
The rights of a trustee are essential for ensuring that the trustee can properly carry out their duties and responsibilities to manage and distribute the trust’s assets in accordance with the trust’s terms. These rights provide trustees with the authority to make decisions and take necessary actions while ensuring that they act in the best interests of the beneficiaries. By clearly defining these rights in the trust agreement, both trustees and beneficiaries can understand the scope of the trustee's authority and responsibilities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.