Chapter 8, Section K:|
Processing with a Trust
Revised August 14, 2008
A trust is both a document and a relationship in which one or more trustees hold property for the benefit of one or more beneficiaries. Such property is said to be "held in trust" by the trustee for the benefit of the beneficiaries.
A trust is established by one or more grantors. The trust may be for the benefit of the grantor or for other beneficiaries. A trust will always name one or more trustees, and will typically also name "successor trustees."
For example, a "family trust" might be established by Mr. and Mrs. Smith (as grantors) for the benefit of themselves and the Smith children (as beneficiaries), with Mr. and Mrs. Smith acting as trustees. The trust might also name Mr. and Mrs. Smith's siblings, children, a friend or a corporate trustee (e.g. a trust company) as "successor" trustee(s) to step into the trustee role at such time as neither Mr. nor Mrs. Smith is available, willing or competent to serve as trustee.
A trustee has a fiduciary responsibility
to act according to the terms of the trust for the benefit of the
beneficiaries. As such he or she is, in a very real, legal sense, a
different person when acting as trustee than when acting as an
individual. In the example above, Mr. Smith, when acting as Trustee of the
Smith Family Trust, has a different identity and a different set of
responsibilities and obligations than he would when acting on his own behalf.
When there is more than one trustee, the
trust document will state, somewhere in the body of the trust, whether
the trustees must manage the
trust together or if any one trustee can act
independently of the other(s).