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If you are thinking about establishing a living trust, you’ve already encountered a variety of new terms over the course of your research. Two of the most important terms are “trustor” and “trustee”. Since these two words look and sound so similar, it’s easy to get them confused. However, they have significant differences when it comes to your estate plan.

This article will give you everything you need to know about the rights and responsibilities of these two roles, including their key differences.

Understanding a Living Trust

A trust is an estate planning tool that allows you to pass money and assets to your chosen beneficiaries. The trust exists as a separate entity from its creator. It holds title to property and files separate tax returns with its own federal tax identification number.

A living trust is an entity that manages your assets both during your lifetime and upon your death. This type of trust is revocable, meaning you can change the terms during your lifetime. One of the advantages of a revocable living trust is that you can avoid probate, a time-consuming and expensive legal process that settles a deceased person’s Last Will and Testament.

The living trust holds your assets and transfers them to your trustee before you die. After your death, the trustee transfers your assets to your beneficiaries. A living trust also can help minimize or delay taxes.

There are four main components to a living trust

  • The trustor (also called the grantor or settlor) is the person who creates the trust.
  • The trustee is the person who holds, manages, and distributes the assets.
  • The assets (sometimes called the corpus) are the money, investments, property, or other valuables held in the trust.
  • The beneficiary is the person or organization for whose benefit the trust was created. There can be more than one beneficiary.

In the majority of living trusts created in the U.S., the trustor, trustee, and beneficiary are all the same person.

What is a Trustor?

Now, let’s look a little more in-depth at the role of the trustor. The trustor (or settlor) is the individual, married couple, or organization that creates a trust.

The trustor often sets up the trust as part of their estate plan as a way to pass on assets to their children or other family members after their death. However, trust beneficiaries do not have to be related to the trustor. For example, charitable organizations are often listed as beneficiaries of living trusts.

After forming the trust, the trustor fills it with assets. The assets can include money and financial investments as well as physical assets, like real estate, vehicles, art, and jewelry.

What is a Trustee?

The trustee is the individual who is responsible for managing the trust and distributing its assets to the beneficiaries when the time comes.

The trustee can take on this role while they are still living or name another trusted individual or organization to handle the position. If the trustor and the trustee are the same person (which is often the case in living trusts in the U.S.), the trustor must name someone to take on the role of trustee upon their death.

A trustee does not need to have prior legal experience, but this person should learn about and understand how trusts work. The trustee must keep a careful account of the trust’s activities and file and pay trust taxes each year. They can only sell trust property and distribute assets according to the rules set by the trustor in the trust document.

In selecting a trustee, you should choose someone you can trust to act in the best interests of your beneficiaries. Beneficiaries may serve as trustees, but, in some families, this double role can be a source of conflict.

Relationship between Trustor and Trustee

As we have discussed, a trustor can serve as the trustee or co-trustee of their living trust. However, if you hold both of these positions, it is essential to appoint someone to take over the role of trustee upon your death.

Relationship between trustor and trustee

Difference Between Trustor and Trustee

Trustor Trustee
Creates a trust Oversees and administers a trust.
Can be a single person, a married couple or an organization Can be the trustor or a trusted friend or family member
Decides how the trust should be funded Has a legal duty to follow terms of the trust
Designates beneficiaries and determines when and how any assets from the trust should be distributed Has a legal duty to act in best interests of the trust beneficiaries

Creating a living trust can give you valuable peace of mind that your assets will go to your beneficiaries in a smooth and timely way after your passing. By knowing more about the differences between trustor and trustee, you can be better equipped to make the decisions needed to establish this important estate planning tool.

Create your legal documents online, you can do so easily and conveniently.

All Legal Dcouments

FAQs About Trustor and Trustee

If you still are a little confused about the relationship between trustor and trustee, you’re not alone. Here are some frequently asked questions about the two roles in a living trust.

  • Who is the trustor in a real estate transaction?

    You may be wondering is the trustor the buyer or the seller in a real estate transaction? In this case, the trustor is the borrower.

    As you will recall, the trustor is the individual whose assets are placed into a trust. In a real estate transaction, the legal title to the borrower’s property is put into the trust. The trustee usually is a separate entity such as a title company.

  • Can a trustor be the trustee of a trust?

    The trustor can serve as trustee of a revocable living trust and receive any trust income during their lifetime. However, a trustor cannot serve as the trustee of an irrevocable trust.

  • How much does it cost to maintain a Trust?

    The cost for setting up and maintaining a living revocable trust varies from state to state and can be affected by the size of the estate. Costs also depend on whether you use the in-person services of an attorney or create the trust yourself using online software.

If you are thinking about establishing a living trust, you’ve already encountered a variety of new terms over the course of your research. Two of the most important terms are “trustor” and “trustee”. Since these two words look and sound so similar, it’s easy to get them confused. However, they have significant differences when it comes to your estate plan.

This article will give you everything you need to know about the rights and responsibilities of these two roles, including their key differences.

Understanding a Living Trust

A trust is an estate planning tool that allows you to pass money and assets to your chosen beneficiaries. The trust exists as a separate entity from its creator. It holds title to property and files separate tax returns with its own federal tax identification number.

A living trust is an entity that manages your assets both during your lifetime and upon your death. This type of trust is revocable, meaning you can change the terms during your lifetime. One of the advantages of a revocable living trust is that you can avoid probate, a time-consuming and expensive legal process that settles a deceased person’s Last Will and Testament.

The living trust holds your assets and transfers them to your trustee before you die. After your death, the trustee transfers your assets to your beneficiaries. A living trust also can help minimize or delay taxes.

There are four main components to a living trust

  • The trustor (also called the grantor or settlor) is the person who creates the trust.
  • The trustee is the person who holds, manages, and distributes the assets.
  • The assets (sometimes called the corpus) are the money, investments, property, or other valuables held in the trust.
  • The beneficiary is the person or organization for whose benefit the trust was created. There can be more than one beneficiary.

In the majority of living trusts created in the U.S., the trustor, trustee, and beneficiary are all the same person.

What is a Trustor?

Now, let’s look a little more in-depth at the role of the trustor. The trustor (or settlor) is the individual, married couple, or organization that creates a trust.

The trustor often sets up the trust as part of their estate plan as a way to pass on assets to their children or other family members after their death. However, trust beneficiaries do not have to be related to the trustor. For example, charitable organizations are often listed as beneficiaries of living trusts.

After forming the trust, the trustor fills it with assets. The assets can include money and financial investments as well as physical assets, like real estate, vehicles, art, and jewelry.

What is a Trustee?

The trustee is the individual who is responsible for managing the trust and distributing its assets to the beneficiaries when the time comes.

The trustee can take on this role while they are still living or name another trusted individual or organization to handle the position. If the trustor and the trustee are the same person (which is often the case in living trusts in the U.S.), the trustor must name someone to take on the role of trustee upon their death.

A trustee does not need to have prior legal experience, but this person should learn about and understand how trusts work. The trustee must keep a careful account of the trust’s activities and file and pay trust taxes each year. They can only sell trust property and distribute assets according to the rules set by the trustor in the trust document.

In selecting a trustee, you should choose someone you can trust to act in the best interests of your beneficiaries. Beneficiaries may serve as trustees, but, in some families, this double role can be a source of conflict.

Relationship between Trustor and Trustee

As we have discussed, a trustor can serve as the trustee or co-trustee of their living trust. However, if you hold both of these positions, it is essential to appoint someone to take over the role of trustee upon your death.

Relationship between trustor and trustee

Difference Between Trustor and Trustee

Trustor Trustee
Creates a trust Oversees and administers a trust.
Can be a single person, a married couple or an organization Can be the trustor or a trusted friend or family member
Decides how the trust should be funded Has a legal duty to follow terms of the trust
Designates beneficiaries and determines when and how any assets from the trust should be distributed Has a legal duty to act in best interests of the trust beneficiaries

Creating a living trust can give you valuable peace of mind that your assets will go to your beneficiaries in a smooth and timely way after your passing. By knowing more about the differences between trustor and trustee, you can be better equipped to make the decisions needed to establish this important estate planning tool.

Create your legal documents online, you can do so easily and conveniently.

All Legal Dcouments

FAQs About Trustor and Trustee

If you still are a little confused about the relationship between trustor and trustee, you’re not alone. Here are some frequently asked questions about the two roles in a living trust.

  • Who is the trustor in a real estate transaction?

    You may be wondering is the trustor the buyer or the seller in a real estate transaction? In this case, the trustor is the borrower.

    As you will recall, the trustor is the individual whose assets are placed into a trust. In a real estate transaction, the legal title to the borrower’s property is put into the trust. The trustee usually is a separate entity such as a title company.

  • Can a trustor be the trustee of a trust?

    The trustor can serve as trustee of a revocable living trust and receive any trust income during their lifetime. However, a trustor cannot serve as the trustee of an irrevocable trust.

  • How much does it cost to maintain a Trust?

    The cost for setting up and maintaining a living revocable trust varies from state to state and can be affected by the size of the estate. Costs also depend on whether you use the in-person services of an attorney or create the trust yourself using online software.