Interest in the Trust Property

Trustee's Interest in the Trust Property One of the fiduciary relationships which arises is between a Trustee and both the Trustor and the Beneficiaries. A Trustee will be most responsible for managing the assets transferred to him/her in Trust and for making sure that these assets earn an appropriate amount of money, if they are assets which should do so.

For example, a Trustee may have a duty to trade stocks, rent property, purchase or sell property or similar duties. The failure to do certain duties may be a breach of this fiduciary duty to either the Trustor or the Beneficiaries.

Trustees have no legal interest in the property transferred to them in trust. They cannot sell this land for their own profit, nor can they pledge any property as collateral for a personal loan to the Trustee. They must act in the best interests of the Trust. The property they hold is never for their own benefit [unless they are ultimately one of the beneficiaries.] A failure to act in a manner consistent with the law of the applicable state and in the best interests of the Trust, may make a Trustee personally liable to the Trust, the Trustor and/or the Beneficiaries.

Beneficiary's Interest in the Trust Property Beneficiaries do not acquire any immediate legal interest in the property transferred to trust either. However, they have certain equitable interests and these are usually defined by state law. It is a safe rule, however, to understand that while a beneficiary may have a future interest in the trust property, they cannot buy, sell, invest, rent, trade, encumber, or any other similar actions as to the Trust property until they actually receive it free of trust.

In fact, one of the primary reasons to establish a Trust is to make certain that the Beneficiaries do not receive certain property at the time the trust is created.

Posted in: Trusts