Is Taking Out a Loan Considered Disbursing Funds?
Full Question:
Answer:
The trustees of an investment trust fund must invest and manage the assets of the investment trust fund in accordance with the requirements of the terms of the trust document and with the reasonable care, skill and expertise of a prudent investor. The trustees of an investment trust fund may incur reasonable investment expenses payable from the assets of the investment trust fund, including but not limited to services of investment managers, investment consultants, actuaries, investment counsel, banks and trust companies and other investment professionals or advisors as they consider necessary and prudent in determining investment policy, in investing funds and in liquidating assets.
The answer will depend on the powers and duties granted in the trust document. Incurring a mortgage typically falls under the investment and borrowing powers defined for the trustee. The trust document will define the power of the trustee to make investments and incur liability for loans. The purpose of the investment will also be a factor. Generally, the trustee may not incur loans to benefit him/herself personally. I suggest you contact a local attorney who can review all the facts and documents involved.
The following is an example of a clause in a trust document:
.9. To borrow money and, if the TRUSTEE sees fit, to
give security for such funds as may be borrowed in such
fashion as the TRUSTEE may see fit by mortgage, pledge,
or otherwise and, in connection with any security which
may be given, to give security for funds borrowed for a
term which may extend beyond the term of the trust. The
TRUSTEE may borrow money to be used for the joint benefit
of the beneficiary of this trust and for the benefit of
the beneficiaries of similar trusts, the corpus of which
consists of undivided interests of the same property as
the corpus of this trust . . .