Who are the Parties to a Trust?
By Katherine Crowell
June 30, 2020
There are generally three parties to a trust:
The “Grantor” is the person who wants to create the trust and put his or her property into it. This person might instead be called the “Settlor,” but it means the same thing.
The “Trustee” is the person or institution that legally owns the property in the trust, but only for the benefit of another person. The Trustee has the duty to safeguard, invest and distribute the trust property as directed by the terms of the trust. A trustee can be an individual, such as a relative, friend, attorney, or accountant, or it can be an institution, such as a bank or trust company. There can be more than one trustee, in which case they are “co-Trustees.”
The “Beneficiary” is the person who will receive the benefit of the property according to the terms of the trust. There can be any number of beneficiaries. A beneficiary can be an individual or an institution, such as a charity.
Let’s look at one simple example. Suppose Bonnie’s Last Will and Testament says:
I give and bequeath to my Trustee, my brother Tom, the sum of X dollars, to be held, administered and disposed of as follows. My Trustee is authorized to pay from time to time so much of the income and principal of the trust as may be advisable, in my Trustee’s discretion, for the health, education, maintenance and support of my son, Alex. When my son reaches the age of 25 years, my Trustee shall distribute the entire balance of the trust to my son.
In this example, Bonnie is the Grantor, her brother, Tom, is the Trustee, and her son, Alex, is the Beneficiary. After Bonnie’s death, her brother, as Trustee, will legally own the property in the trust, but will be obligated to safeguard and invest it until Alex is 25 years old. During that time, Tom has the authority to decide when and how much of the trust to spend for the support of the Alex, and will pay the balance of the trust property to Alex when the trust ends.
Excerpt from the book Estate Planning for the Savvy Client: What You Need to Know Before You Meet With Your Lawyer by Mary L. Barrow, Esq.
Copyright ©2020, 2017 by Mary L. Barrow
THIS EXCERPT IS A BRIEF SUMMARY FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR THE ADVICE OF COMPETENT LEGAL COUNSEL FROM AN ATTORNEY ADMITTED OR AUTHORIZED TO PRACTICE LAW IN YOUR JURISDICTION. YOU SHOULD ALWAYS CONSULT YOUR ATTORNEY BEFORE IMPLEMENTING OR CHANGING ANY ESTATE PLANNING STRATEGY.