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Executory Trust (Imperfect Trust)

Moneyzine Editor
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Moneyzine Editor
1 mins
September 25th, 2023
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Definition

The term executory trust refers to an agreement in which there are additional items to attend to before the trustee can fulfill their fiduciary duties to beneficiaries. An executory trust is one in which the settlor, or donor, has not clearly outlined the trustee's responsibilities to the beneficiaries.

Explanation

Also known as an imperfect trust and incompletely constituted trust, an executory trust is any agreement that needs additional attention before it is said to be perfected. This means there remains ambiguity as to the donor's instructions, the trust's beneficiaries, or the assets placed into the trust. The donor / settlor must provide additional instructions, or take some action, before an executory trust can be executed. Until it is perfected, the document is considered provisional only. A trustee cannot fulfill their fiduciary responsibility to protect the assets placed in the trust or carry out the donor's instructions until the document is perfected.

An executory trust can be contrasted with an executed trust, which requires no additional attention of the donor or trustee before it is believed to be perfected.

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