Management Agreement
A Management Agreement is a contractual arrangement in which one party (the manager) is authorized to manage the business operations or assets of another party (the owner or principal) for a specified period of time. This agreement typically outlines the responsibilities, scope of authority, compensation, and duration of the management services being provided.
In the context of estate planning and trusts, a Management Agreement may be employed when an individual or entity is designated to manage a trust’s assets or the estate of a deceased person. This can include overseeing investments, handling day-to-day operations, and ensuring compliance with legal and financial obligations.
Key components of a Management Agreement often include:
-
Parties Involved: Identifies the manager and the owner/principal.
-
Scope of Services: Details the specific duties the manager will perform, such as making investment decisions, managing property, or maintaining business operations.
-
Compensation: Specifies how the manager will be compensated for their services—this may be a percentage of profits, a flat fee, or based on other metrics.
-
Term: Indicates the duration of the management arrangement, including provisions for renewal or termination.
-
Liability and Indemnification: Addresses the manager’s liability for decisions made and whether they will be indemnified against losses incurred while acting within the scope of their authority.
-
Reporting Requirements: Provides guidelines for how the manager will report to the owner, including frequency and content of reports on performance and financials.
For example, a family might enter into a Management Agreement with a financial advisor to manage a trust established for minor children. The advisor would be responsible for investing trust assets and ensuring funds are utilized according to the trust’s terms, thereby helping to preserve and grow the estate over time.
Overall, a Management Agreement serves to clarify the working relationship between the parties, establish expectations, and protect the interests of both the manager and the owner.
« Back to Glossary Index