Also known as:trusts · trustee · trustees · trustor · trustors · trusteeship · trusteeships · settlor
Written by attorneys · grounded in primary & secondary sources — see below
A fiduciary relationship in which one party holds legal title to property for the benefit of another. The trustee owes duties of loyalty and care to the beneficiary and must account for any profits derived from the property.
Sources & Authorities
How it applies
Common Examples
6
Land Sale Risk Allocation
Theodore Tucker contracts to sell his home to Tamara Tan for $400,000. Before closing a storm destroys the roof. Tamara must still pay the full price because risk passed at contract formation. Theodore holds legal title as trustee for Tamara until the deed is delivered.
Office Of Trust Restriction
Tanner Thompson, a sitting member of Congress, is asked to serve as an elector in the presidential election. The Constitution bars any person holding an office of trust under the United States from serving as an elector. Tanner therefore declines the appointment to avoid violating the eligibility rule.
Select any source to read its text and confirm it supports the definition.
Cases
Statutes
Federal Rules
Uniform Acts
Model Codes
Common Law
Restatements
Attorney Tabitha Taylor maintains a client trust account at First Bank. The bank charges a $25 monthly service fee. Tabitha deposits exactly $25 of her own funds into the account solely to cover that fee. She withdraws no other personal money from the account.
LLC Member Profit Holding
Tyrone Tran, a member of Titan Industries LLC, uses company resources to secure a personal consulting contract. He receives a $50,000 fee from the client. Tyrone must account for the fee to the LLC and hold it as trustee for the company until the LLC decides its distribution.
Marital Property In Trust
Tori Taylor and her spouse place their jointly owned vacation home into an irrevocable trust for estate planning. The home retains its character as marital property. Upon divorce the court may still divide the trust interest between the spouses under marital property rules.
Partnership Profit Accounting
Thunderbolt Motors partnership earns a secret commission on a deal arranged by partner Tamara Tan. Tamara receives the commission personally. She must account for the commission to the partnership and hold it as trustee for the firm until the partners determine its allocation.
Common questions
Frequently Asked
5
When does risk of loss pass to the buyer in a land sale contract?+
Under the majority rule risk passes at contract formation. The seller then holds legal title as trustee for the buyer. The buyer therefore bears any loss even though the seller still holds the deed.
May a lawyer place personal funds in a client trust account?+
A lawyer may deposit the lawyer's own funds only in the amount necessary to pay bank service charges on that account. Any larger deposit would violate the rule requiring separation of lawyer and client property.
What duty does an LLC member owe when deriving a profit from company resources?+
The member must account to the company and hold the profit as trustee for the LLC. This fiduciary obligation prevents the member from retaining the benefit personally.
Does transferring marital property into a trust change its character?+
Marital property transferred to a trust remains marital property. The transfer does not convert the asset into separate property of either spouse.
What obligation does a partner have regarding profits derived from partnership opportunities?+
The partner must account to the partnership and hold any such profit as trustee for the firm. The duty prevents secret personal gain from partnership-related transactions.
438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978)Property
…indeed, achieved by a shorter cut than the constitutional way of paying for the change. Footnotes [^maj-1]: See National Trust for Historic Preservation, A Guide to State Historic Preservation Programs (1976); National Trust for Historic Preservation, Directory of Landmark and Historic District Commissions (1976).…