Also known as: trustee power · trustees powers · trustees' powers · powers of trustee · trustee authority
Written by attorneys — see sources below.
Authorities vested in a trustee to manage and administer trust property in accordance with the trust terms and applicable law.
True North Logistics sold equipment to trustee Theo Thomas for trust assets. The company had no knowledge that Thomas was exceeding his authority under the trust instrument. Because the transaction occurred in good faith and for value, the company faces no liability even though Thomas later misused the equipment.
Settlor Trevor Tate named himself trustee of a trust holding investment assets and retained extensive administrative powers over distributions and investments. The court examined whether those powers gave Tate sufficient dominion and control to include the trust corpus in his taxable estate at death.
The executor paid the federal estate tax that included the value of the trust principal and filed suit for a refund in the district court. All facts were stipulated for the district court proceeding. The district court ruled for the government. The executor appealed to the United States Court of Appeals for the First Circuit. The decedent had been a donor to three inter vivos trusts previously established by his wife. He served as a trustee of the trusts until the date of his death. The initial life beneficiary was the decedent's adult son. Eighty percent of the trust income was normally payable to the son, with the balance added to principal. Subsequent beneficiaries were the son's widow and his issue. The trust instruments contained powers in Article 4 and Article 7. Article 4 permitted the trustees in their absolute discretion to increase the percentage of income payable to the son when needed in case of sickness or desirable in view of changed circumstances. The trustees could also cease paying income to the son and add it all to principal during such period as they decided the stoppage was for his best interests. Article 7 gave the trustees broad administrative powers, including discretion to acquire investments not normally held by trustees and authority to determine what was to be charged or credited to income or principal. It further empowered the trustees generally to do all things in relation to the trust fund which the donor could do if living and the trust had not been executed. The government claimed that the powers in the two articles required inclusion of the trust corpus in the decedent's estate. The executor disputed this position after paying the tax and seeking recovery. The district court had ruled against the executor on the stipulated facts, leading directly to the appeal.
View caseA person who in good faith assists a trustee or deals with a trustee for value without knowledge that the trustee is exceeding powers receives the same protection as if the trustee had properly exercised the power.
Supporting sources
A person who in good faith deals with a trustee need not inquire into the extent of the trustee's powers or the propriety of their exercise.
Supporting sources
The primary source of trustee powers is the trust instrument itself, though statutes supply additional default powers when the instrument is silent.
…1916, 223 Mass. 97, 101, 111 N.E. 795. : See, e. g., Old Colony Trust Co. v. Rodd , 1970 Mass.A.S. 25, 254 N.E.2d 886, trustee of trust to provide “comfortable support and maintenance,” rebuked for “parsimonious” exercise of judgment. : Many of the cases we are about to cite consider whether there is an…