Who is a Trustee?
A Trustee is a person that is given the legal responsibility to manage, administer and/or hold property for the benefit of another person. He or she is usually appointed in accordance with the terms of the trust deed whereafter he must act in the best interest of the trust while undertaking his duties.
Who can be appointed as Trustee?
The person who creates the trust (hereinafter called “the settlor”) is often appointed as the first Trustee, solely or jointly with other persons, until they resign, die or become incapacitated and are succeeded in accordance with the terms of the trust deed. In addition to the settlor, the following persons can be appointed as Trustee: –
- Friends or Peers;
The settlor is at liberty to appoint any of his trusted friends or peers as trustee so long as they are above the age of 18 years and are of sound mind. Since the position of trustee requires constant interaction with the settlor’s family members, the settlor should select the most responsible, reliable and amiable friend to be a trustee. - Relatives;
Most settlors appoint their family members to be a trustee in their family trust especially when they have minor children. Although this is the preferred approach, the settlor should be wary of potential family drama or resentment that may arise during the administration of the trust. To prevent this, settlors should apprise themselves of their family member’s character and capabilities to be sure that the relative is up to the task or appoint an independent trustee (e.g. a corporate trustee) jointly with the relative trustee. - Trust Corporation;
Hiring a trust company like Gabael Trust Corporation can be a great option for settlors for many reasons. Trust companies are often independent and reliable and are able to take a stern, matter-of-fact approach while managing the settlor’s estate per the discretion and guidance of the Trust. This in turn safeguards the settlor’s legacy and reduces cases of mismanagement of the Trust.
What are the general duties of a Trustee?
A Trustee owes a duty of honesty, integrity, loyalty and good faith to the beneficiaries of the trust. He or she should also be prepared to undertake the following duties during their tenure as trustee as per the terms of the trust deed: –
- Act as a fiduciary:
The role of a fiduciary is one that is held in high regard because it entails acting in good faith while protecting the investments of the trust and undertaking the distribution of the trust assets. This core duty requires the trustees not to place themselves in a position where their duty and interest may conflict with their duties in the trust.
- Ensure the safety of trust assets:
Having read and understood the contents of the trust deed, the trustee should manage the trust assets accordingly making sure to keep proper and accurate record of all dealings with the trust assets.
- To observe the terms of the trust deed:
Trustees must read, understand and strictly comply with the duties and directions set out in the trust deed.
- To act impartially between the beneficiaries
Trustees must balance competing interests between beneficiaries and not allow one beneficiary to suffer at the expense of another. He or she must treat all beneficiaries with equal respect and dignity.
- To provide accurate information
Trustees are under a duty to provide clear and accurate accounts and produce any information, or other documents relating to the trust when required to do so by a beneficiary.
- To exercise reasonable care and ensure the correct distribution of assets.
Trustees must ensure that the assets of the trust vest to the beneficiaries in accordance with the distribution model of the trust.
- Not to profit from the Trust
A trustee is not permitted to gain any benefit directly or indirectly from the Trust, for example, a trustee is normally not permitted to purchase Trust property.
What constitutes breach of duties by Trustees?
Below are some reasons why a trustee may be sued for breach of their duties as per the terms of the trust deed:-
- When the trustee refuses to produce proper accounts or provide updates of all dealings, investments, transfers or pay-outs of the trust funds or trust property to the beneficiaries.
- When the trustee embezzles funds from the trust;
- When the trustee engages in self-dealing –this includes actions such as purchasing assets from the trust, borrowing from the trust even if the trustee repays the borrowed funds or investing the trust funds in their personal businesses, to name a few.
How can we help?
Due to the challenges and complexities that can arise in the day to day administration of trusts, it is advisable for appointed trustees to seek professional help. At Gabael, we have an excellent team of experts and strategic partners across the East African region who can advise you, as necessary, on the nature and extent of your powers and duties as a trustee. We can also be appointed, solely or jointly with other trustees, to offer reliable and independent trustee services
Get in touch with us today to take advantage of our excellent and cost-effective services.
Karibu Gabael.
If you have any further questions, or would like to talk to someone about establishing a family trust, make an appointment with us or contact us through legal@gabaeltrust.com.
