Duties of a trust administrator

Written by david carnes
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Duties of a trust administrator
The trust administrator does not have to be an individual, it could be a bank. (Vlad Kochelaevskiy/iStock/Getty Images)

When a trust is created, a trust administrator is appointed to administer the trust assets for the benefit of the beneficiaries according to the terms of the trust. A trust administrator need not be an individual -- in many cases, banks serve as trust administrators. Trust law imposes a number of obligations on trust administrators, and these obligations are similar in almost every common law nation.

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Knowledge

A trust administrator must be intimately familiar with the terms of the trust deed. A trust deed is like a constitution that sets out how the trust is to be administered.

Good faith

A trust administrator must strictly abide by the terms of the trust as set out in the trust deed -- he is considered to be a delegate who merely executes the terms of the trust deed, not a policymaker.

Fairness

A trust administrator must act fairly to all trust beneficiaries and may not play favourites, unless a particular beneficiary is favoured under the terms of trust deed.

Loyalty

A trust administrator must act in the best interests of the trust beneficiaries. He may not gain personally from any transaction, even if no beneficiary is harmed by his gain. He may not intermingle the trust assets with his own -- by placing trust funds in his personal bank account, for example.

Independence

A trust administrator may not play a passive role with respect to other trust administrators, merely "rubber stamping" their decisions -- he must actively participate in decision-making and exercise independence of judgment, even if it means opposing other trust administrators. If he uncovers self-dealing or other corruption on behalf of another trust administrator, he must act vigorously to protect the trust assets, even if it means subjecting the other trust administrator to prosecution.

Accuracy

A trust administrator must keep accurate records of all transactions that take place with respect to the trust funds, and must pay the correct beneficiaries. He must accurately report to the beneficiaries on the condition of the trust assets if so requested. A full written account of all activity with respect to the trust assets must be prepared every year.

Prudence

Trust administrators often invest trust assets on behalf of the beneficiaries. A trust administer must exercise at least as much care in investing trust assets as he would with his own assets. If the trust assets are liable for taxation, the trust administrator must file and pay taxes on time on behalf of the trust. If he delegates any of these tasks to outside parties, he must prudently select competent delegates, maintain adequate communication with them and personally make any decisions on behalf of trust assets that are outside the authority of outside parties to make.

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