A trustee is an individual or company that serves a managerial function in connection with some type of property. Trustees serve as managers in connection with mortgage loans, and they also serve as managers of trust relationships created for the ownership property. A successor trustee is a new trustee who replaces a previous trustee, while a co-trustee is a trustee that serves at the same time as another trustee.
A trust is a formal legal relationship created for the ownership and management of property. Trusts are common tools in an estate planning tool belt. Trusts often work hand in hand with wills for the distribution of property to heirs. Each trust agreement is managed by a trustee or co-trustees who follow the trust agreement instructions relating to all property in the trust. If the trustee dies or no longer desires to serve, then the trust agreement will provide a procedure for appointment a successor, or replacement, trustee.
A trust deed is a legal document used in connection with mortgage loans. The trust deed is the document that gives the mortgage lender a mortgage lien on the borrower's property. For example, if you take out a mortgage loan on your house, you will sign a trust deed granting the lender a lien on your house. The trust deed will identify an independent third party, typically an attorney or title company, as the trustee. The trustee is the person or entity that will carry out foreclosure if the borrower fails to make the required mortgage payments.
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Co-trustees can only serve together under trust relationships, but not trust deeds. Each trust may identify only one trustee. A trust relationship, on the other hand, may identify two or more trustees to serve as co-trustees. Generally, each co-trustee has authority to make decisions on behalf of the trust, but some trust agreements require a majority vote, or even unanimous consent, of each co-trustee before any action may be taken on behalf of the trust.
A successor trustee can serve under both a trust relationship and a trust deed. Under trust deeds, it is common for mortgage lenders to name a title company as the initial trustee, but then to replace the title company with an attorney or foreclosure service company when foreclosure becomes necessary. The lender signs a document called a "Substitution of Trustee" that names the successor, or replacement trustee. The successor trustee then carries out the foreclosure process for the lender. Successor trustees can also be appointed under trust relationships in the manner provided in the trust agreement. If the trust agreement does not specify a process for appointing a successor trustee, then the trust beneficiaries can ask a state court judge to appoint a successor trustee.