If you are planning to set up a living trust, you will hear a lot about two similar terms – trustee and trustor. Although these appear the same, they have significant differences. Therefore, it is crucial to understand the differences between them before finalizing your trust.
Generally, trustees and trustors have a unique role during the trust lifecycle. In austere worlds, a trustor is the person who creates a trust, while a trustee is the person assigned to administer it.
Moreover, it may be straightforward, but both the trustee and trustor must follow the instructions in the trust to keep it legally valid. Likewise, if a trustor chooses to manage his trust, both duties can overlap.
In addition, there are different types of trusts; therefore, it is critical to understand this concept before developing a trust.
A trust is a legal document a trustor sets up to own or hold their assets. There is no limit on the nature of assets, including property, investments, digital assets, vehicles, cash, etc.
However, compared with a testament or last will, a trust offers privacy and a smooth transition of assets. Therefore, trust is a better option for a person who intends to have better control over his assets while living and after his death.
Furthermore, there are numerous types of trusts, and your requirements will determine the best option for you and your loved ones.
A trustor is the person or entity who creates a trust. A single person, more than one person, or even an organization can be a trustor. A trustor is also known as a "grantor" or "settlor" in different states.
Furthermore, the trustor will "fund the trust" by filling the trust with his assets. In addition, they will mention the names of the beneficiaries (people or organizations). Likewise, the trustor will outline all guidelines and instructions for the distribution of assets.
The information mentioned above is placed on a trust agreement or declaration of trust document.
To make a valid trust, a trustor must fulfill below obligations:
Since a trustor creates a trust, a trustee is responsible for executing the same trust.
Like a trustor, a trustee can be a single person, multiple persons, or even an organization. Moreover, a trustor can even nominate himself as a trustee or a beneficiary of the trust. Further, the trustor determines the duties of a trustee.
The trust type, terms, and conditions determine when a trust becomes valid; thus, a trustee's duties begin and end. Their duties can start as soon as they are appointed or may begin later, as outlined in the trust, after a particular event, like the trustor's death.
The trustor mentions the duties of a trustee in a trust. So, they must follow the same terms and act according to the details mentioned in the faith. Moreover, once a trustee accepts his role, they assume fiduciary responsibility for the trust.
Therefore, a trustee must act in the best interest of the trust's beneficiaries. Likewise, they can be removed from their role if they fail to perform to the best of beneficiaries.
Generally, a trustee has to perform the following duties:
If you are planning to appoint a trustee, you can follow the below steps to legally complete all requirements required for the appointment of a trustee.
A trustee takes care of the trust assets. For example, if you have a car, you own the vehicle and sell it anytime you want. However, a trustee is a person who is not the actual owner of the assets but instead acts on behalf of the owner as entrusted by the trust.
If a trustor dies, the assets remain under the custody of the trust. If the trustor has nominated himself as the trustee, the successor trustee will take over the trust management.
However, the trustee must administer the trust per the trustor's guidelines. It includes the distribution of assets among beneficiaries and the subsequent termination of the trust.
No legally binding authority exists for nominating a trustee; however, a close family member, friend, lawyer, or institution (bank or trust company) is usually designated as a trustee.
Trustee vs trustor is a concept that confuses many people. A trustor is a person or an organization that writes down a trust, empowering another person or organization, known as the trustee, to act on his or her behalf in the case a particular event occurs.
Therefore, the trustor appoints a trustee to oversee the distribution of assets as per his wish. However, the trustor can also appoint himself as his trustee. In this case, he must appoint a successor trustee to manage tasks if he dies.
Generally, a trustor writes a trust document bearing details regarding a list of assets and their beneficiaries. The document also includes the appointment of a trustee and its acceptance. Moreover, the trust contains details of payments details, like taxes, utilities, and others.
With this, we conclude our discussion differentiating trustee and trustor. We hope you enjoyed reading and are now fully aware of the concept. Please leave feedback in the comments section.