A Trustee Indemnity Clause is a provision often included in a trust document that protects the trustee from personal liability for actions taken in their capacity as trustee, as long as those actions are not the result of gross negligence or willful misconduct.
This clause is significant because it provides reassurance to individuals serving as trustees, who manage the trust and carry out its terms, that they will not face personal financial loss due to the decisions made while administering the trust. The indemnity typically covers legal expenses, losses, and damages that may arise from lawsuits or claims related to the trust’s administration.
For example, if a trustee makes a decision that leads to a legal challenge by a beneficiary claiming the trustee acted improperly, the Trustee Indemnity Clause would allow the trustee to seek reimbursement from the trust’s assets for any legal fees or damages incurred, as long as the trustee acted in good faith and within the scope of their authority.
In jurisdictions like Texas, including Houston, it is common for trust documents to incorporate such clauses to attract competent individuals to serve as trustees, knowing they are afforded some protection against personal financial repercussions due to their fiduciary responsibilities.
« Back to Glossary Index