In a formal fiduciary relationship, the trustee is governed by the written trust agreement and by certain legal and ethical obligations that come with the role. This is true regardless of the type of trust involved or the assets held within it.
The trustee is the individual or entity responsible for managing the assets held within a trust. Trustees are appointed by the trustor, who is the person who created the trust, and have a duty to act in the best interests of the trust beneficiaries. This duty is commonly referred to as the fiduciary duty.
As part of their fiduciary duty, trustees are required to follow the terms of the written trust agreement. The trust agreement is a legal document that outlines the terms of the trust, including the purpose of the trust, the assets held within it, and the beneficiaries. The agreement also outlines the powers of the trustee, which may include the ability to invest, manage, and distribute trust assets.
The trustee must also abide by the legal and ethical obligations that come with the role. These obligations include a duty of loyalty, which requires the trustee to act solely in the interests of the beneficiaries and not in their own self-interest. The trustee must also exercise reasonable care and skill in managing the trust assets and must not engage in any activities that could harm the trust or its beneficiaries.
In addition, the trustee must keep accurate records of all transactions related to the trust and provide regular accountings to the beneficiaries. This helps ensure transparency and accountability in the management of the trust.
If a trustee fails to fulfill their fiduciary duties, they can be held liable for any losses incurred by the trust or its beneficiaries. This is why it is essential for trustees to act diligently and responsibly in managing the trust assets.
In conclusion, in a formal fiduciary relationship, the trustee is governed by the written trust agreement and by legal and ethical obligations. These obligations are designed to ensure that the trustee acts in the best interests of the trust beneficiaries and fulfills their fiduciary duty. By following these guidelines, trustees can help ensure the long-term success and stability of the trust.