A trustee is a third party who is authorized by a settlor to execute and manage trust assets. A trustee holds the title of the trust asset. A trustee is a requirement of an express trust along with trust property, trust intent, and definite beneficiaries.
Trustees should perform their duties from trust instruments, are guided by laws, and their performance should be solely in the best interest of the beneficiary. Using trust assets for their own benefits is forbidden. Meanwhile, if there are multiple beneficiaries, the trustee should act impartially instead of favoring anyone over others. Trustees who manage investments should invest assets prudently. Trustees cannot mix trust assets with their own, thus, they should have separate accounts for management and investment. Keeping clear and accurate records of assets management is also required.
The trustee and the beneficiary usually cannot be the same person unless the trustee is not the sole beneficiary. Settlors, however, can be trustees and continue to manage their assets.
If the trustee dies, resigns, refuses to act, or is removed, the trust still exists and the court will appoint a new trustee. The new trustee is called the successor trustee.
[Last updated in August of 2022 by the Wex Definitions Team]