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Resource Management

Another form of ownership in which several people (or groups of people) share property rights (share "sticks in the bundle") is a trust.This web page introduces the legal concept of trusts as a way to share (control?) property ownership.This section also introduces the concept of fiduciary responsibility -- a concept that has application in numerous areas of law other than trusts.


A trust involves one party (the trustee) managing property for the benefit of another (the beneficiary). For an example of state statutes dealing with trusts, see N.D.C.C. title 59.

Parties to a trust

  • Settlor: person who creates the trust using their property (it may be easiest to assume the settlor owned the property as a fee simple absolute before the trust was created); see N.D.C.C. §59-09-03(18).
  • Trustee: person(s) who own and manage the trust property.
    • A settlor may want to designate co-trustees to assure multiple perspectives are considered in managing the property; for example, one co-trustee may be selected for his or her financial and business management skills while another co-trustee may be selected because of his or her understanding of the beneficiaries' needs.
  • Beneficiary: person or persons designated by the settlor to receive the benefits of the trust property.
    • The benefits from the trust generally are 1) the income from the property during the existence of the trust, and 2) the principal or property of the trust when the trust is terminated; see N.D.C.C. §59-09-03(3).

In general, a trust must be for the benefit of the beneficiaries, see N.D.C.C. §59-12-04.


Use of a Trust

Trusts are used for a variety of purposes; a simple example is transferring property to several heirs in a sequence of steps.

"One of the provisions in George's will created the George Massad Trust [hereinafter Trust], the assets of which comprised most of his Estate. The Trust was created to provide for the care and support of Anna, George's wife, during her lifetime and on her death was to be distributed to their children, Martha, Cecelia, James, Lester, Gemal, and Mason, in varying amounts." Matter of Massad Trust

"Orell McGuire died on January 19, 1977. She left a will ... The will directed that the property be distributed as follows: ... and 660 shares of Guirell Corporation common stock to Joseph R. McGuire in trust, for the benefit of Eric L. McGuire, Bernard J. McGuire, Regis P. McGuire, and Henry B. McGuire... McGuire v. Gaffney

Another example may be individuals who do not want the responsibility of managing their property. In such a situation, the property owners may establish a trust (that is, be the settlor of the trust) by entering into an agreement that the trustee will manage the property for the benefit of the property owners (that is, the settlors name themselves as the beneficiaries).

A third example may be a property owner who wants to transfer assets to another person for that person's benefit, but realizes that the other person may not be able to manage the property. In that case, the property owner could establish a trust for the benefit of the other person, but relieve that person of management responsibilities by specifying a trustee to oversee the property.

"Kryzsko is a 52-year-old mentally disabled woman. She is the beneficiary of a trust established through a will by her deceased father, Alfred J. Kryzsko. Kryzsko's sister, Sally Stocker, was appointed to administer the trust. It was originally funded with $32,000 on January 1, 1996, from which Kryzsko was being paid $450 a month. In January 1997 the trust principal of $32,539.10 was invested in a Certificate of Deposit from which Kryzsko receives a monthly payment of $500. Under the amortization schedule, Kryzsko will continue to receive payments of $500 a month until July 2003, when the trust principal is exhausted." Kryzsko v. Ramsey County Social Services


What does it mean to be a trustee?

A trustee has a fiduciary responsibility to the beneficiaries; that is, the trustee must manage the property in the best interests of the beneficiaries.

Fiduciary responsibilities arise in situations other than a trust; for example, "'[f]iduciary' means a personal representative or a trustee. The term includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function." See N.D.C.C. §59-04.2-01(3).

A fiduciary responsibility arises any time an individual is obligated to care for someone else's property; for example, as a state employee, I have a fiduciary responsibility to use the state's property for state purpose, and not for my private benefit.  Likewise, a fiduciary responsibility arises if a homeowner asks a neighbor to take care of the homeowner’s house home while the homeowner is away for a vacation, or if an individual asks a friend to  “keep an eye” on the person’s coat while the person steps out of the room for a few minutes. 

Because of its broad application, it is helpful to understand fiduciary responsibility; however, it may be easiest to learn about the concept in its application to trusts.


Trustee's Duties

A trustee is obligated to act in the best interest of the beneficiaries. For example, N.D.C.C. §59-09-05(2)(b) mentions the trustee's duty to act in good faith.

More specifically, N.D.C.C. chap. 59-16 lists the following duties:

  • 59-16-01. “…the trustee shall administer the trust in good faith…”
  • 59-16-02. “A trustee shall administer the trust solely in the interests of the beneficiaries…”
  • 59-16-03. “… the trustee shall act impartially in investing, managing, and distributing the trust property…
  • 59-16-04. “A trustee shall administer the trust as a prudent person would…”
  • 59-16-05. “…the trustee may incur only costs that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee.”
  • 59-16-06. “A trustee who has special skills … shall use those special skills or expertise.”
  • 59-16-07. “A trustee may delegate duties and powers … the trustee shall exercise reasonable care, skill, and caution in selecting an agent…”
  • 59-16-08. “While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.” [revocable trust is described in a subsequent section]
  • 59-16-09. “A trustee shall take reasonable steps to take control of and protect the trust property.”
  • 59-16-10. “A trustee shall keep adequate records of the administration of the trust."
  • 59-16-10. “A trustee shall keep trust property separate from the trustee's own property.”
  • 59-16-11. “A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.”
  • 59-16-12. “A trustee shall take reasonable steps to compel a former trustee or other person to deliver trust property to the trustee...”
  • 59-16-13. “A trustee shall keep beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary's request for information related to the administration of the trust.”
  • 59-16-14. “the trustee shall exercise a discretionary power in good faith and in accordance with the purposes of the trust.”
  • 59-16-17. “Upon termination or partial termination of a trust, the trustee may send to the beneficiaries a proposal for distribution.”


The "Prudent Person" Standard

Trust property is considered properly managed if the trustee acted as a prudent person would have had the trustee been the owner.

  • N.D.C.C. §59-16-04. Prudent administration. "A trustee shall administer the trust as a prudent person would by considering the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution."
  • N.D.C.C. Chapter 59-17. Prudent Investor Standards.
    • 59-17-02(1) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.


Types of Trusts

A settlor can establish a trust to take effect during their lifetime or to take effect at the time of their death.

  • Intervivos trust: a trust established during the settlor's lifetime.
  • Testamentary trust:  a trust established according to instructions trustor provided in his or her will; the trust is not formed until after settlor’s death.

A trust assures the property owner's (the settlor's) plan for the future management and ownership of the property is fulfilled, while the beneficiaries enjoy the income of the property without the responsibility of direct management (that is handled by the trustee). However, a trust (especially a trust designed to last a long time) can be difficult to redirect if future events are different than the settlor anticipated.

How do trusts arise?

Most trusts arise from an agreement between the settlor and the trustee (individual or corporate). The agreement identifies the beneficiaries, specifies when and what they will receive from the trust, and sets forth when the trust will terminate. See N.D.C.C. §59-12-01 et seq.

  • N.D.C.C. §59-12-01. A trust may be created by [1] transfer of property to another person as trustee during the settlor's lifetime or by will ... [or] [2] declaration by the owner of property that the owner holds identifiable property as trustee, or ...
  • N.D.C.C. 59-12-02. A trust is created only if [1] the settlor has capacity to create a trust, [2] the settlor indicates an intention to create the trust, [3] the trust has a definite beneficiary ...; [4] the trustee has duties to perform; and [5] the same person is not the sole trustee and sole beneficiary.
    N.D.C.C. §59-12-07 -- Trust agreements can be oral.


What control does the settlor retain over the trust property?

The agreement between settlor and trustee establishes the degree of control the settlor retains over the trust property by specifying whether the trust is revocable or irrevocable. The difference between a revocable trust and an irrevocable trust is the "degree of control the settlor retains over the trust."

  • Irrevocable -- settlor has relinquished all control and authority over the property; settlor cannot change or discontinue the trust agreement.
    • N.D.C.C. §59-14-02(1). "Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust."
    • N.D.C.C. §59-14-03(1). "While a trust is revocable, rights of the beneficiaries are subject to the control of [the settlor], and the duties of the trustee are owed exclusively to, the settlor."

    A testamentary trust, by its nature, is an irrevocable trust.


What can a trustee do?

The following points summarize North Dakota statutes that set forth some of a trustee's authorities.

  • 59-16-15. “A trustee may exercise 1) powers conferred by the terms of the trust and, 2) except as limited by the terms of the trust, all powers over the trust property which an unmarried owner, who is not an incapacitated person, has over individually owned property, 3) any other powers appropriate to achieve the proper investment, management, and distribution of the trust property…”


  • 59-16-16. [A] trustee may 1. collect trust property; 2. acquire or sell property at public or private sale; 3. exchange, partition, or otherwise change the character of trust property; 4. deposit or invest trust money in a regulated financial institution; 5. borrow money; 6. continue or discontinue to operate a business; 7. with respect to stocks, exercise the rights of an absolute owner; 8. with respect to an interest in real property, construct or make ordinary or extraordinary repairs to, alterations to, or improvements in, buildings or other structures, demolish improvements, raze existing or erect new party walls or buildings, subdivide or develop land, dedicate land to public use or grant public or private easements, and make or vacate plats and adjust boundaries; 9. enter into a lease for any purpose as lessor or lessee, including a lease or other arrangement for exploration and removal of natural resources, 10. grant an option or acquire an option; 11. insure the property of the trust; 12. abandon, distribute, or decline to administer property of no value or of insufficient value to justify its collection or continued administration; 13. with respect to possible liability for violation of environmental law, inspect or investigate property the trustee holds; 14. pay or contest any claim, settle a claim by or against the trust, and release, in whole or in part, a claim belonging to the trust; 15. pay taxes, assessments, compensation of the trustee and of employees and agents of the trust, and other expenses incurred in the administration of the trust; 16. exercise elections with respect to federal, state, and local taxes; 17. select a mode of payment under any employee benefit or retirement plan; 18. make loans out of trust property; 19. pledge trust property to guarantee loans made by others to the beneficiary; 20. appoint a trustee to act in another jurisdiction; 21. pay an amount distributable to a beneficiary; 22. on distribution of trust property or the division or termination of a trust, make distributions in divided or undivided interests; 23. resolve a dispute concerning the interpretation of the trust of the trust's administration by mediation, arbitration, or other procedure for alternative dispute resolution; 24. prosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee's duties; 25. sign and deliver contracts and other instruments that are useful to achieve or facilitate the exercise of the trustee's powers; 26. purchase and pay from trust principal the premiums on life insurance; 27. allocate items of income or expense to either trust income or principal, including creation of reserves out of income for depreciation, obsolescence, or depletion; 28. … 29. employ persons to advise or assist the trustee in the performance of administrative duties; 30. deal with the personal representative, trustee, or other representative of any other trust or estate in which a beneficiary of the trust estate has an interest; 31. on termination of the trust, exercise the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to the property.

What is a trustee prohibited from doing?

See N.D.C.C. §59-16-02. "... a transaction involving the investment or management of trust property entered into by the trustee for the trustee's own personal account or which is otherwise affected by a conflict between the trustee's fiduciary and personal interests is voidable by a beneficiary..."

  • Pre-2007 North Dakota statutes: although they have been repealed, these former statutes may provide insight into the legal concept of fiduciary responsibility.
    • Former N.D.C.C. §59-01-10. A trustee shall not use or deal with the trust property for the trustee's own profit or for any other purpose not connected with the trust.
    • Former N.D.C.C. §59-01-11. Neither a trustee nor any of the trustee's agents may take part in any transaction concerning the trust in which the trustee ... has an interest ... adverse to that of the trust's beneficiary...
    • Former N.D.C.C. §59-01-12. A trustee may not use the ... trustee's position ... to obtain any advantage from the trust's beneficiary.
    • Former N.D.C.C. §59-01-13. No trustee ... may undertake another trust adverse ... to the interest of the [original] trust's beneficiary...
    • Former N.D.C.C. §59-01-14. If a trustee acquires any interest or becomes charged with any duty adverse to the interest of the trust's beneficiary in the subject of the trust, the trustee immediately must inform the latter thereof and may be removed at once.
    • Former N.D.C.C. §59-01-16. All transactions between a trustee and the trust's beneficiary ... by which the trustee obtains any advantage from the trust's beneficiary, are presumed to be entered into by the [beneficiary] without sufficient consideration and under undue influence.
    • Former N.D.C.C. §59-01-17. A trustee who willfully and unnecessarily mingles the trust property with the trustee's own ... is liable for its safety in all events.

What can a beneficiary do?

Generally, beneficiaries have no control over the management of the trust; that responsibility and authority belongs to the trustee. But the beneficiaries can enforce the trust arrangement; that is, initiate a lawsuit if they feel the trustees are not fulfilling their fiduciary responsibility or adhering to the directions set forth by the settlor.

N.D.C.C. §59-15-06. "a beneficiary may request the court to remove a trustee... "

How is a trust enforced?

  • "a trust will ordinarily be enforced in a court of equity" Bogert et al, Law of Trusts , 5th Ed., p. 550.See N.D.C.C. chapters 30.1-32 and 30.1-33.

  • See N.D.C.C. §59-10-01 "The court may intervene in the administration of a trust to the extent its jurisdiction is invoked by an interested person or as provided by law."

  • "When construing a trust instrument, this Court's primary objective is to ascertain the settlor's intent... The settlor's intent is crucial in determining the nature and extent of the beneficiary's interest in the trust..."Eckes v. Richland Co. Social Service Board, 2001 ND 16.

  • The trustee can be surcharged if the fiduciary responsibility is not met. Surcharge means the trustee must pay from his/her own assets whatever amount was not available to the beneficiaries because the trustee did not properly manage the trust property.
  • 59-18-01(2).  "To remedy a breach of trust that has occurred or may occur, the court may compel the trustee to perform the trustee's duties; enjoin the trustee from committing a breach of trust; compel the trustee to redress a breach of trust by paying money, restoring property, or other means; order a trustee to account; appoint a special fiduciary to take possession of the trust property and administer the trust; suspend the trustee; remove the trustee…; reduce or deny compensation to the trustee; … void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or order any other appropriate relief."

59-18-02(1).  "A trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of [1] the amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred or [2] the profit the trustee made by reason of the breach."

  • N.D.C.C. §59-15-06. Removal of trustee. "The settlor, a co-trustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative... The court may remove a trustee
    1. if the trustee has committed a serious breach of trust;
    2. if lack of cooperation among co-trustees substantially impairs the administration of the trust;
    3. if because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or
    4. if there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available."

Why serve as a trustee?

What happens if a trustee is unable to continue serving?

  • "A vacancy in a trusteeship ... which is required to be filled must be filled in the following order of priority. First, the vacancy must be filled by a person designated in the terms of the trust or appointed under the terms of the trust to act as successor trustee. Second, the vacancy must be filled by a person appointed by unanimous agreement of the qualified beneficiaries. Finally, the vacancy must be filled by a person appointed by the court." N.D.C.C. §59-15-04(3).
  • See N.D.C.C. §§59-15-04 to -06.

Other points about trust

  • An individual can function in more than one role with respect to a trust except there must be a difference between trustee(s) and beneficiary(ies).
  • There is no reason for the trust (fiduciary responsibility) to exist if there is no difference between the trustee and beneficiary; in that case, the property interests merge.

More Types of Trusts

A prior section introduced intervivos and testamentary trusts -- both which arise as a result of the settlor's decision to create a trust. This section introduces additional types of trusts, but these fiduciary responsibilities arise as a matter of law, that is, they arise because our legal system believes they are needed to remedy a problem.

  • Implied Constructive Trust: A court ordered relationship used to remedy an actual fraud or abuse of a confidential relationship

    "[I]f a person assumes a relation of personal confidence he becomes a trustee, and any transaction he enters into with the other person by which he gains an advantage is presumed to be made under undue influence ... The highest good faith is required of a trustee, who is not to profit from dealing with trust property ... A constructive trust may be imposed when property is acquired in violation of a fiduciary duty or confidential relationship."See Black v. Peterson, 442 N.W.2d 426 (N.D. 1989)

  • Implied Resulting Trust:A trust presumed by law, based on the parties' intent as evidenced by their acts and the surrounding facts and circumstances.

    Example: Property paid for by Smith but Jones' is specified as the owner; if there is no reason to assume Smith intended to gift the property to Jones, Jones will be considered as holding the property in trust for Smith.

North Dakota statutory law does not apply to a resulting or constructive trust, see N.D.C.C. §59-09-02(2)(o).

  • Pre-2007 North Dakota statutes: although they have been repealed, these former statutes may provide insight into the legal concepts of implied trusts.

Former N.D.C.C. §59-01-05. Implied trust - Definition. An implied trust is one that is created by operation of law.

Former N.D.C.C. §59-01-06. Implied trust - How created. An implied trust arises in the following cases:

1. One who wrongfully detains a thing is an implied trustee thereof for the benefit of the owner.

2. One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless the person has some other and better right thereto, an implied trustee of the thing gained for the benefit of the person who would otherwise have had it.

3. Each one to whom property is transferred in violation of a trust holds the same as an implied trustee under such trust, unless the person purchased it in good faith and for a valuable consideration.

4. When a transfer of real property is made to one person and the consideration therefor is paid by or for another, a trust is presumed to result in favor of the person by or for whom such payment is made.

  • [¶5] "An implied trust is one that is created by operation of law." ... There are two types of implied trusts: resulting and constructive. ... A constructive trust is an equitable remedy to compel a person "who unfairly holds a property interest to convey such interest to the rightful owner." ... A constructive trust is imposed to prevent the unjust enrichment of the person wrongfully interfering with the owner's possession of the property. ... An implied trust, whether resulting or constructive, must be established by clear and convincing evidence. Schroeder v. Buchholz , 2001 ND 36.

  • Former N.D.C.C. §59-02-16. No compensation to implied trustees. The trustee of an implied trust who becomes such through the trustee's own fault has none of the rights to compensation.

Land Trust

  • A land trust is available in only a few states; it was available in North Dakota until 2007 (see former N.D.C.C. §59-03-02).
  • Historically, the land trust has been an alternative when state law limited or prohibited a corporate business structure for certain businesses.
  • Only real property can be involved in a land trust.
  • The trustee is the owner of the trust property (as in most trusts), but the beneficiaries direct the trustee's actions. This arrangement is contrary to the more normal practice that trustees take their direction from the settlor, and the beneficiaries are not allowed to influence the trustee's decisions.
  • The land trust provides a means to change ownership of beneficial interest without altering the recorded ownership.

How do trusts end?

Trusts come to an end when they expire according to the terms specified by the settlor at the time the trust was established.  Revocable trusts also end if the settlor decides to terminate the trust.  Finally, state law (for example, North Dakota state law) allows the court to modify or terminate a trust in several situations, as summarized below.

59-12-10. a trust terminates to the extent the trust [1] is revoked or [2] expires pursuant to its terms, [3] no purpose of the trust remains to be achieved, or [4] the purposes of the trust have become unlawful or impossible to achieve.

59-12-11. A noncharitable irrevocable trust may be terminated upon consent of all of the beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust. A noncharitable irrevocable trust may be modified upon consent of all of the beneficiaries if the court concludes that modification is not inconsistent with a material purpose of the trust.

59-12-12. Upon petition by the trustee, the attorney general, or an interested party other than the settlor, the court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification must be made in accordance with the settlor's probable intention.


59-12-14. After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than $100,000 may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.

59-12-15 The court may reform the terms of a trust to conform the terms to the settlor's intention if it is proved by clear and convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake.


59-12-16. To achieve the settlor's tax objectives, the court may modify the terms of a trust in a manner that is not contrary to the settlor's probable intention.


59-12-17. After notice to the qualified beneficiaries, a trustee may combine two or more trusts into a single trust or divide a trust into two or more separate trusts, if the result does not impair rights of any beneficiary or adversely affect achievement of the purposes of the trust.


How long can a trust exist?

A noncharitable trust cannot last forever. At some time in the future, the trust must terminate so the final beneficiaries acquire full ownership, such as a fee simple absolute interest in the property. But trusts can be created so they last a long time; note this North Dakota statute indicating that trusts can last as long as 90 years.

  • N.D.C.C. §47-02-27.1.1. A contingent property interest [such as a future beneficiary interest] is invalid unless:

    a. When the interest is created, it is certain to vest or terminate no later than twenty-one years after the death of an individual then alive; or

    b. The interest either vests or terminates within ninety years after its creation.

Summary of Key Points

In summary, this page introduced trusts and the parties to a trust (settlor, trustee, and beneficiary); it also introduced the concept of fiduciary responsibility. Review the following points:

  • A trust as a tool for sharing ownership of property rights; also as a tool that allows the settler to “control” future decisions.
  • The role of the settlor, trustee and beneficiary of a trust.
  • The concept of "fiduciary responsibility."
  • The frequency of fiduciary responsibilities in settings other than trusts.
  • The expectation for someone with a fiduciary responsibility.


The next page introduces easements, profits, and licenses.

Last updated November 7, 2008

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