“Trustee” refers not to a specific role, but a range of different possibilities each with certain duties and responsibilities.
Who may become a trustee?
Anyone with the capacity for property ownership can become a trustee at law. This may include a beneficiary of a trust. However, it is important to note that a sole beneficiary to a trust cannot be its trustee, because the position will cease to exist due to the merging of the separate and equitable estate. A corporate trustee is that of a company, which is permitted at law.
Should a settlor decide to vest property to a person who cannot become a trustee due to the lack of legal capacity, the trust remains valid because a trust cannot fail due to the absence of a trustee, because of the influence of equity. In such circumstances, the courts will appoint another person to the role.
The form of trustees
The role of trustee can take a number of forms; a trustee may be appointed by a settlor of a private or charitable trust in accordance with either a trust instrument or trust deed. Trustee companies or the public trustee may also establish trustees.
The manner in which a trustee is classed may be influenced by the role to be undertaken and can include, bare, custodian, or advisory trustees. These may come into being by implication of law, such as in the case of a resulting trust. Alternatively, it may come into existence by operation of law, which is the case in relation to a constructive trust.
How are trustees appointed?
Express terms of a trust instrument, statute or court appointment are the primary ways in which a trustee is appointed. Alternatively, a trust instrument may detail how and when a trustee (referred to here as an “original trustee”) is appointed.
Failing the express power of appointment in a trust instrument, a trustee may be appointed under statute. The legislation dictates the circumstances of the appointment, and the types of potential appointee. Statutes also grant power to the courts to appoint, remove or replace trustees is the court is satisfied that doing so is in the best interest of the beneficiary or necessary to advance the purpose of the trust. In doing this, courts consider the welfare of the beneficiary, and the safety of the trust property.
What are the different types of trustees?
Public trustees: fulfil various functions that may involve administration of wills, small estates or the estates of persons lacking capacity.
Trustee companies: although the specific legislation varies between jurisdictions, trustee companies act within their statutory capacity as executors and administrators of an estate. The primary role of a trustee company is to invest and manage funds on behalf of their clients.
Bare trustees: holds property for the benefit and disposal for a beneficiary who is of age and capacity. The trustee must have no interest in the property being held beyond legal title, nor should they have any other duties to undertake beyond conveying the property at such time that is demanded by the beneficiary or beneficiaries.
Custodian trustees: some jurisdictions permit custodian trustees to hold the trust property and to deal with it via managing trustees. Failing any contrary provision, the trust instrument may allow a custodian trusteeship conforming to the terms expressed by a settlor.