Trustor Vs Trustee - What Do These Roles Entail?

Creating a trust can be confusing, so much so that even the main roles associated with the trust, trustor vs trustee, sound similar. While the names can be mistaken for each other, their functions are completely different.

Generally speaking, trustors and trustees play a unique part in the overall lifespan of the trust: a trustor is the one who created it, while a trustee is the one tasked with administering it. Both maintain the trust in accordance with the trust documentation, and the duties of the trustor vs trustee may overlap if the creator of the trust decides to manage it on their own. 

Here’s what you can expect if you ever have to fulfill any of these roles.

What Is A Trust?

Trust is often used in estate planning and is, at its core, a legal arrangement set up to own the trustor’s assets such as digital assets, financial accounts, and real estate, among others. The biggest advantage of using a trust is that you can pass on these assets without going through probate. 

As opposed to a will, a trust also offers more privacy and allows your beneficiaries (individuals receiving the assets) to benefit from a smoother transition. Furthermore, you have more control over how your assets are handled after you pass away. 

Trustor’s Duties

The trustor is the party who created the trust. We’re using the word party because trusts can also be created by multiple people (such as spouses) and an organization. Upon setting up the trust, the trustor has to fund it with assets, choose beneficiaries, set the guidelines, and assign trustees. 

A trustor can also choose to be the trustee themselves, in which case they’ll also have to appoint a successor trustee who will administer the trust if they are incapacitated or pass away. 

During the trust’s creation, the trustor can also set the terms of the trust, such as which assets will be used in funding the trust, who will receive these assets, and in which circumstances. For instance, the trustor has complete control of how the assets are handled after their death and can instruct the trustee to sell a piece of property to pay for the beneficiaries’ education. 

Trustee’s Duties

When it comes to trustor vs trustee, the main distinction is that the trustee is the one who is mainly responsible for managing the trust. A trustee can be an individual, multiple persons, or an organization. 

The trustee’s duties and limits of power are outlined in the trust documentation. Depending on the terms set forth by the trustor, the trustee can assume this role right after the trust becomes effective, or they may start assuming responsibility only when a particular event occurs, such as the trustor’s incapacitation or death. 

Upon accepting their role, trustees assume fiduciary responsibility for the benefit of the trust. In other words, they have a legal duty to act in the best interest of the beneficiaries, and they’re legally responsible for living up to these standards.

Their duties may include:

• Overseeing the administration of the trust, which may include day-to-day administrative tasks like maintaining records or long-term actions like paying taxes or outstanding bills.
• Distributing assets to beneficiaries or using the same assets to pay for healthcare expenses, bills, or taxes if the trustor is incapacitated.

Other duties depend on the type of trust and the specifics of trust documents. The grantor’s status also plays a key role in the responsibilities of the trustee. 

Can A Beneficiary Be A Trustee?

Regardless of whether the trustee is an organization or an individual, they can also be chosen as the beneficiary of a trust. 

Since this may lead to a conflict of interest, especially if multiple beneficiaries are involved, estate planning attorneys often appoint a co-trustee who will assist the trustee with administering the trust. This ensures both trustees are acting in the beneficiaries’ best interests. 

It’s worth noting that a trustor can appoint as many trustees as they want. However, the more people are in the role, the higher the chance of conflict. To circumvent this problem (or at least minimize it), you should set clear expectations and instructions for each trustee. 

For example, you can implement a term that requires co-trustees to reach a majority decision before they act. 

What Happens When A Trustor Passes Away?

Upon the trustor’s death, the assets stay in control of the trust. If the trustor fulfills the role of the trustee in life, a successor trustee named in the documents will take over the management of the trust. 

The successor trustee is then obligated to follow the guidelines of the trust when managing and administering the assets. This may include communication with beneficiaries, distributing the assets, and ultimately, canceling the trust as soon as the terms are fulfilled.

How To Avoid Conflicts Of Interest

Trustor vs trustee (including conflicts of interest with beneficiaries) can be avoided with a policy that clearly spells out various factors like disclosure requirements, prohibited transactions, and remedial steps if a violation of the terms begins.

The key is to incorporate terms that require the trustee to maintain all records of decisions and transactions, as well as the reasoning behind them. 

This helps keep the trustee in check and protects your rights and the rights of your beneficiaries. 

Create A Foolproof Trust Now!

Both a trustor and trustees are necessary for the successful management of a trust. The trustor is the one who creates it, provides the assets, and leaves precise instructions on the way it’s supposed to be managed. They’re also the ones who appoint trustees, individuals responsible for administering the trust assets by the trust terms. 

In contrast to a will, which is relatively simple and doesn’t require an attorney, you’ll need a legal professional to create a trust. 

To start on the right foot, seek out the attorneys from Doane & Doane. Not only will we help you create a basic trust, but we’ll also strengthen it with policies that eliminate the possibility of violations on behalf of the trustee. 

As the estate planning law firm of choice for many Florida citizens and businesses for over twenty years, working with us provides you with a guarantee your family’s assets and rights always stay protected. 

You can learn more about what we offer - call 561-656-0200 or fill out our contact form.

FAQs

1. Can a trustor also be a trustee?

Yes, it is possible for the trustor to designate themselves as the initial trustee, especially in revocable trusts.

2. What happens if a trustee fails in their duties?

A trustee can be removed for breaching their fiduciary duties, and a replacement trustee may be appointed.

3. Do trustees get paid?

Yes, trustees can receive compensation for their services, especially in complex or time-consuming trusts.

4. Can a trustor change the terms of a trust?

Depending on the type of trust, a trustor may have the ability to modify or revoke trust terms during their lifetime.

5. How long does a trust last?

Trusts can continue for many years, depending on the trustor's instructions and the nature of the trust assets.

Note: 

The information in this blog post is for reference only and not legal advice. As such, you should not make legal decisions based on the information in this blog post. Moreover, there is no lawyer-client relationship resulting from this blog post, nor should any such relationship be implied. If you need legal counsel, please consult a lawyer licensed to practice in your jurisdiction.