The trustee is not liable for the loss because it was a result of the general economic conditions in the area. As a result, the vacancy rate in the apartment building rises to 90% and the trust loses substantial revenue. A few years later, the main employer in the area goes out of business, so people leave the area to find new jobs. A records the deed to the apartment building in his name. Consider the following example: O gives A an apartment building to hold in trust to pay the income from the rents to B for life. If the trustee fails to earmark the trust property, he is only liable for any losses that result from his failure to earmark. The trustee is not obligated to earmark certain types of securities. Thus, the trustee must make it clear that he owns the house as trustee and not as an individual. The purpose of this requirement is to prevent the trust property from being attached by the trustee’s creditors. For example, if A receives a house to hold in trust for B, A must put the trust’s name on the deed instead of his own name. Once the trustee obtains the trust property, he has a duty to earmark the property as belonging to the trust. For trusts that are funded by money, the trustee has the duty to invest the principle in order to make enough money, so that the beneficiary receives the necessary income.ĩ.2 The Duty to Earmark Trust Property and to Not Comingle Trust Funds If the property in the trust is a house, the trustee has duty to do things like keeping the house in good repair and paying the necessary taxes. The steps the trustee must take to preserve the trust property depend on the nature of the property. Once the trustee receives the trust property, that person has a duty to protect the property. If A receives $300,000 instead of the $400,000 mentioned in the trust instrument, A has a duty to resolve the discrepancy with O’s executor. After O dies, O’s executor notifies A and B about the existence of the trust, and delivers the money to A. For instance, O leaves $400,000 to A in trust for the benefit of B. In the event there is a problem with the trust property, the trustee has duty to challenge the executor, including filing a law suit to make sure that the trust property is restored. After he receives the property, the trustee is required to examine the property tendered to make sure it corresponds with the property listed in the trust instrument. When the testator dies, the testator is legally obligated to obtain possession of the trust assets from the executor of the estate as soon as it is feasible. 9.1 The Duty to Collect and Protect Trust Property
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