Trust Relations – Overview
There are various kinds of trusts with trustees having different roles. In most trust formations, the trustee manages property for the benefit of the beneficiary. In a nominee trust, the trustee merely holds title to real estate subject to the control and direction of the beneficiary. Trusts are established through the execution of a declaration of trust, which sets forth the scope of authority of the trustee, and a schedule of beneficiaries.
Courts may impose a constructive trust where no trust previously existed in order to avoid the unjust enrichment of one party at the expense of another where, for instance, legal title to property is obtained (a) by fraud or (b) in violation of a fiduciary duty or where information confidentially given or acquired is used to the advantage of the recipient at the expense of the one who disclosed the information.
A trustee has a fiduciary duty to abide by the terms of the trust declaration. A trustee also has a more general fiduciary duty of honest advice and full disclosure to the beneficiary. A trustee may be liable for expressing dishonest opinions upon which a beneficiary detrimentally relies and concealing facts which by reason of the relationship should be disclosed to the beneficiary.
An action for breach of fiduciary duty does not accrue until a trustee repudiates the trust. The beneficiary must have actual knowledge of the repudiation, which must be an open, definite and unequivocal assertion by the trustee disavowing the trust obligation and announcing an intention to hold trust property adversely to the interests of the beneficiary.