What is a trust?
A trust exists when one person (the trustee) holds title to property for the benefit of another person (the beneficiary).
A person called the grantor (also known as the settlor or trustor) creates the trust and transfers property in the trust. The grantor, trustee, and beneficiary can be different people. It is also possible that one single person could be the grantor, trustee and beneficiary.
What is a trustee?
The trustee is the person or entity (such as a bank or trust company) that holds legal title to the property in the trust. The trustee’s job is to manage the property in the trust for the benefit of the beneficiaries pursuant to the terms of the trust.
A trustee has all the powers set forth in the trust document (unless they conflict with New York law or unless a court order says otherwise). The trustee has a duty to collect, preserve and protect the trust assets.
Generally speaking the trustee must:
- Follow what the trust document says (as long as it is legal);
- Do only things that benefit the beneficiaries;
- Not favor one beneficiary over another (unless the trust document says otherwise);
- Avoid conflicts of interest with the beneficiaries
- Never use trust property for personal benefit (unless the trustee is also a beneficiary);
- Keep trust property separate from property owned by anyone else;
- Administer and invest the assets of the trust with reasonable care and skill, protect the trust and accomplish the purposes of the trust as set forth in the trust document;
- Keep detailed records and provide the beneficiaries with periodic reports and accountings as required by New York law.
- Make proper determinations of what is income versus principal when the trust directs that they be distributed differently.
What is a trust "beneficiary"?
A beneficiary of a trust is a person who by the terms of the trust has the current or future right to have the trustee pay out cash or other trust property to him or her. Unless the trust is revocable by someone else the beneficiary generally has the following rights, in addition to any other rights listed in the trust:
- The right to receive notice of the existence of the trust.
- The right to receive a copy of the trust.
- The right to receive trust information about the beneficiary's interests in the trust.
- The right to enforce the terms of the trust and to hold the trustee accountable for any wrongful acts or omissions that affect that beneficiary's interests.