Though they sound fairly similar, the terms Trustor vs Trustee are actually quite different when it comes to Estate Planning. Because these roles have significant differences, understanding the basics of each is important. At the core, a Trustor is just the person who creates and opens a Trust. A Trustee, however, is the person who’s appointed to manage that Trust.
Sounds pretty simple, right? Yes, the definitions are ultimately straightforward. But it can help if you truly understand the full duties and responsibilities of each role if you’re about to step into either job. So if you’re planning on becoming either a Trustor or a Trustee any time in the near future, read on to learn everything you need to know about the difference between Trustee and Trustor.
What is a Trustor?
Trustor is the term used in Estate Planning to identify a person or entity who creates a Trust. He or she can also be called a Grantor or Settlor, and they do much more than just create the Trust document.
First - what is a Trust? Trusts are used as part of an overall Estate Plan to accomplish a number of goals. Depending on the type of Trust that’s used, they can be great Estate Planning tools that can enhance asset protection, help reduce (or even eliminate altogether) some taxes, or guide the transfer of wealth from one family member to another. They’re also an effective way to help avoid probate (the lengthy, costly, often stressful, public legal process that certain estates have to go through to be settled after a loved one passes away).
The Trustor is the person who initially sets up a Trust. Trustors can be a single person, a married couple or even an organization. They decide how a Trust should be funded (meaning what assets will be held inside it). And, they designate beneficiaries and determine when, where and how any inheritance from the Trust should be distributed. Finally, Trustors are responsible for selecting who should be Trustee, also known as the person who will manage the Trust.
What is a Trustee?
A Trustee is the person or organization a Trustor names to oversee managing and administering a Trust. Trustees have what’s known as a fiduciary responsibility (a legal duty) to act in the best interest and on behalf of the Trust and the beneficiaries named in it.
Want to learn more about the role of a Trustee? Check out What is a Trustee: Everything You Need to Know today!
What’s the Difference Between Trustee and Trustor?
The simple difference between a Trustee and a Trustor is that while the Trustor creates the Trust and names the Trustee, the Trustee uses the direction given within the Trust document to manage it. Trustor and Trustee work together in the sense that the ultimate goal of any Trust is to safeguard the assets it names, and to one day distribute those assets accordingly.
A Trustee has many responsibilities, including managing all the day-to-day Trust activities and and accounts, overseeing distributions to heirs and investments and perhaps most importantly, filing and paying taxes the Trust may owe annually. For every activity and responsibility, a Trustee is specifically guided by directions outlined in the Trust. Of course, this direction all comes directly and explicitly from the Trustor at the time the Trust is created.
Learn More Helpful Trust Terminology
Estate Planning can be a complicated thing. There are often many moving parts, and understanding the common terminology used in the various tools and aspects can help the process be seamless. Whether you’re the Trustee of a Trust, the Trustor who made it, a beneficiary of the Trust, or if you have any other vested role in an Estate Plan, learning the language of Estate Planning can help you navigate any part of the process.
Trust & Will is an online Estate Planning service that takes the guesswork out of planning for your future. Our online Trusts, Wills and Guardianship documents were created by lawyers and Estate Planning experts who understand what it takes to create a solid plan that protects you, your loved ones and your legacy.
There’s a lot to think about (and know!) when you’re creating your Trust or getting ready to act as a Trustee. Understanding the differences between Trustor vs Trustee is step one.
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