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Are a trustee and a trustor the same?

On Behalf of | Jun 27, 2024 | Trusts

When planning for your future and the financial security of your family, you might consider setting up a trust. However, trusts can seem complex if you are unfamiliar with them. You may have heard of a trustor and a trustee and wonder if both roles are essentially the same.

An effective trust can distribute your assets according to your wishes, potentially avoiding probate and providing tax benefits. Setting up an effective trust involves knowing how trustors and trustees function and if one person can fulfill both roles.

Defining trustees and trustors

A trustor, also known as a grantor or settlor, creates the trust. As the trustor, you decide what assets to place in the trust, how they should be managed, and who should benefit from them. You establish the rules and conditions for the operation of the trust.

On the other hand, a trustee manages the day-to-day activities of the trust. This involves keeping records of what happens with the trust, filing and paying taxes for the trust, and distributing assets to beneficiaries according to the terms of the trust. Trustees have a fiduciary duty to act in the best interests of the trust and its beneficiaries.

Trustees and trustors are not always the same

In some cases, the trustor can also serve as the trustee. This typically occurs with revocable trusts, where you retain control over the assets of the trust during your lifetime. As both the trustor and trustee, you can manage trust money and property, and also make changes to the trust as needed.

However, for irrevocable trusts, the trustor usually cannot act as the trustee. Irrevocable trusts transfer ownership of the assets to the trust itself, providing potential benefits like asset protection and tax advantages. In these cases, an independent trustee manages the trust to maintain its legal separation from the trustor.

Understanding the roles of trustee and trustor helps you make informed decisions about estate planning. While these roles can sometimes overlap, they serve distinct functions. Consider your specific needs and goals when deciding how to structure your trust and who should fill these important roles.