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Simple English definitions for legal terms
corporate trustee
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A quick definition of corporate trustee:
A corporate trustee is a group of people who work at a bank or investment firm and are hired to manage a trust. They are experts in trust matters and can help create a trust that reflects the creator's wishes. Unlike personal trustees, corporate trustees are impartial and have a legal duty to follow the creator's intentions. They are paid a percentage of the trust's assets, which encourages them to increase the trust's income. While family members or friends can also be trustees, they may have personal feelings or interests that could affect their decisions.
A more thorough explanation:
A corporate trustee is a department within a bank or investment firm that is hired to create and manage a trust. They are hired for their professional experience in trust matters, which family members or friends may not have. Corporate trustees can help build a trust that better reflects the creator's intentions, and they are mostly impartial actors bound by fiduciary duties to follow the creator's intentions.
Corporate trustees are usually paid between 0.5% - 2% annually of the trust's assets. While this may seem costly, paying trustees by percentage encourages them to increase the income of the trust and therefore their pay. Family members or friends may have personal feelings or interests guiding their actions as trustees, though they are often less expensive.
John wants to create a trust for his children's education. He hires a corporate trustee to manage the trust because they have the professional experience to ensure that the trust is managed properly and in accordance with his wishes. The corporate trustee is bound by fiduciary duties to follow John's intentions, ensuring that the trust is used for his children's education.
Another example is when a wealthy individual wants to create a trust to support a charitable cause. They may hire a corporate trustee to ensure that the trust is managed properly and that the funds are used for the intended purpose.
These examples illustrate how corporate trustees are hired for their professional experience and impartiality in managing trusts, ensuring that the creator's intentions are followed and the trust is used for its intended purpose.