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Trustee vs. Trustor: Understanding the Key Roles in a Trust

When setting up a trust, it’s essential to understand the distinct roles of a trustor and a trustee. These two parties play crucial roles in managing and distributing trust assets according to the grantor’s wishes. But what exactly does each role entail? Let’s break it down.

What is a Trustor?

A trustor—also known as a grantor or settlor—is the person who creates the trust. They transfer assets into the trust and establish the terms governing how those assets will be managed and distributed.

Responsibilities of a Trustor:

• Creates the trust document
• Defines the terms and beneficiaries
• Transfers assets into the trust
• Appoints a trustee to manage the trust

A trustor can set up different types of trusts, including revocable trusts, which allow modifications, and irrevocable trusts, which generally cannot be changed after creation.

What is a Trustee?

A trustee is the person or institution responsible for managing the trust according to the terms set by the trustor. The trustee acts as a fiduciary, meaning they must act in the best interests of the beneficiaries.

Responsibilities of a Trustee:

• Manages trust assets
• Follows the trust terms
• Distributes assets to beneficiaries as instructed
• Files taxes and keeps records
• Acts in the best interest of the beneficiaries

A trustee can be an individual, a financial institution, or even a law firm. The trustee’s legal duty is to uphold the trust’s terms without bias or self-interest.

Key Differences Between a Trustee and a Trustor

Can a Trustor and Trustee Be the Same Person?

Yes, in some cases, the trustor can also be the trustee, particularly in a revocable living trust. This arrangement allows the trustor to retain control of their assets during their lifetime. However, after their death, a successor trustee takes over to manage and distribute assets.

Why Understanding These Roles Matters

Choosing the right trustee is crucial for ensuring that the trustor’s wishes are carried out properly. A trustee should be:

• Trustworthy and responsible
• Knowledgeable about financial and legal matters
• Willing to act in the best interest of the beneficiaries

Conclusion

The trustor establishes the trust and sets the rules, while the trustee carries out those rules and manages the assets. Understanding these distinctions is key to successful estate planning. If you need help setting up or managing a trust, The Lange Firm in Sugar Land, Texas, can guide you through the process.