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. 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.
Both a trustor and trustee are part of the four main components of a living trust, which include:
- 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.
This article will give you everything you need to know about the rights and responsibilities of these two roles, including their key differences.
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.
Difference Between Trustor and Trustee
In the following table, you can find an explanation of what a trustor and trustee do and how they are different in relation to a living will.
| Category | Trustor (Grantor/Settlor) | Trustee |
|---|---|---|
| Primary role | Creates the living trust | Manages and administers the trust |
| Main responsibility | Establishes the rules and goals of the trust | Carries out the instructions in the trust document |
| Ownership of assets | Transfers assets into the trust | Oversees and controls trust assets on behalf of beneficiaries |
| Decision-making power | Decides how assets should be distributed | Makes administrative and financial decisions according to the trust terms |
| Legal duty | Creates the legal arrangement | Has a fiduciary duty to act in the beneficiaries' best interests |
| Who can serve | An individual, married couple, or legal entity | The trustor, a family member, friend, attorney, or professional fiduciary |
| Ability to edit the trust | Can amend or revoke a revocable trust | Cannot change the trust unless authorized |
What Are the Duties of a Trustee?
The primary responsibility of a trustee is to fulfill the directions of the trust. Apart from the main responsibilities of administering the trust, a trustee may be required to do any of the following tasks:
- Understand the trust's terms: Trust assets must remain secure, so the trustee must understand the trust's basic rules. They need to know who all the beneficiaries are and have access to all the records to ensure they are accurate and in order.
- Make investments: A trustee should invest assets in accordance with the trust's directions to preserve them now and in the future.
- Continuously make decisions: Trustees should be able and willing to decide how and when beneficiaries receive payments and other trust provisions. In these decisions, trustees exercise discretionary powers.
- Prepare tax-related forms and filings: Trustees must keep financial records and statements organized along with tax returns.
- Respond to beneficiaries' questions as necessary: It may include statements, account information, and tax reports. Over time, the duties of a trustee may also change.
What Makes a Good Trustee?
Any Trust Agreement relies heavily on the trustee. In selecting a trustee, the following qualities are most important:
- Honesty
- Stability
- Dependability
- Organization
- Financial experience
- An impartial commitment to the interests of all 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. trustee, you can be better equipped to make the decisions needed to establish this important estate planning tool.
Start your Living Trust Form now
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.
-
What are the fiduciary duties of a trustee?
A trustee with a fiduciary duty must act to benefit that person financially. They must account for the ill-gotten profit if he breaches his duties. Damages are usually payable to beneficiaries. Trustee duties relate to the management of the trust under the law. Loyalty is the most important duty.
Trustee legal ownership prevents the trustee from exploiting the legal ownership for his benefit, violating the duty of loyalty. To act in good faith and to make prudent investments, the trustee must act in good faith.
-
Can a trustee delegate duties?
The Uniform Trust Code codifies much of the common law on trusts. According to the Uniform Trust Code, a trustee may delegate duties and powers. The Uniform Prudent Investor Act Section 9 states that an agent should be chosen with care, skill, and caution to perform investment and management functions.
Delegation can, under appropriate circumstances, apply to the selection of trust investments, the management of specialized investment programs, or other activities involving significant judgment on the part of the administration.
In addition, section 807(c) of the Uniform Trust Code provides that as long as a trustee complies strictly with subsection (a) of the code, they are not liable to the beneficiaries or the trust.
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. 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.
Both a trustor and trustee are part of the four main components of a living trust, which include:
- 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.
This article will give you everything you need to know about the rights and responsibilities of these two roles, including their key differences.
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.
Difference Between Trustor and Trustee
In the following table, you can find an explanation of what a trustor and trustee do and how they are different in relation to a living will.
| Category | Trustor (Grantor/Settlor) | Trustee |
|---|---|---|
| Primary role | Creates the living trust | Manages and administers the trust |
| Main responsibility | Establishes the rules and goals of the trust | Carries out the instructions in the trust document |
| Ownership of assets | Transfers assets into the trust | Oversees and controls trust assets on behalf of beneficiaries |
| Decision-making power | Decides how assets should be distributed | Makes administrative and financial decisions according to the trust terms |
| Legal duty | Creates the legal arrangement | Has a fiduciary duty to act in the beneficiaries' best interests |
| Who can serve | An individual, married couple, or legal entity | The trustor, a family member, friend, attorney, or professional fiduciary |
| Ability to edit the trust | Can amend or revoke a revocable trust | Cannot change the trust unless authorized |
What Are the Duties of a Trustee?
The primary responsibility of a trustee is to fulfill the directions of the trust. Apart from the main responsibilities of administering the trust, a trustee may be required to do any of the following tasks:
- Understand the trust's terms: Trust assets must remain secure, so the trustee must understand the trust's basic rules. They need to know who all the beneficiaries are and have access to all the records to ensure they are accurate and in order.
- Make investments: A trustee should invest assets in accordance with the trust's directions to preserve them now and in the future.
- Continuously make decisions: Trustees should be able and willing to decide how and when beneficiaries receive payments and other trust provisions. In these decisions, trustees exercise discretionary powers.
- Prepare tax-related forms and filings: Trustees must keep financial records and statements organized along with tax returns.
- Respond to beneficiaries' questions as necessary: It may include statements, account information, and tax reports. Over time, the duties of a trustee may also change.
What Makes a Good Trustee?
Any Trust Agreement relies heavily on the trustee. In selecting a trustee, the following qualities are most important:
- Honesty
- Stability
- Dependability
- Organization
- Financial experience
- An impartial commitment to the interests of all 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. trustee, you can be better equipped to make the decisions needed to establish this important estate planning tool.
Start your Living Trust Form now
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.
-
What are the fiduciary duties of a trustee?
A trustee with a fiduciary duty must act to benefit that person financially. They must account for the ill-gotten profit if he breaches his duties. Damages are usually payable to beneficiaries. Trustee duties relate to the management of the trust under the law. Loyalty is the most important duty.
Trustee legal ownership prevents the trustee from exploiting the legal ownership for his benefit, violating the duty of loyalty. To act in good faith and to make prudent investments, the trustee must act in good faith.
-
Can a trustee delegate duties?
The Uniform Trust Code codifies much of the common law on trusts. According to the Uniform Trust Code, a trustee may delegate duties and powers. The Uniform Prudent Investor Act Section 9 states that an agent should be chosen with care, skill, and caution to perform investment and management functions.
Delegation can, under appropriate circumstances, apply to the selection of trust investments, the management of specialized investment programs, or other activities involving significant judgment on the part of the administration.
In addition, section 807(c) of the Uniform Trust Code provides that as long as a trustee complies strictly with subsection (a) of the code, they are not liable to the beneficiaries or the trust.
Most Popular Posts
Some states require a motor vehicle bill of sale form; others do not. Even if only for your personal records, anyone who buys or sells a vehicle needs
If your minor child travels alone in the United States, you will most likely be required to complete documentation through the airline's...