What is the difference between a Trustor, a Trustee and a Beneficiary?
There are typically three main parties to a Trust:
The person who provides property and creates a trust is called a trustor. This person may also be referred to as the "grantor," "donor" or "settlor."
The trustee is the individual, institution or organization that holds legal title to the trust property and is responsible for managing and administering those assets. If not designated by name, a trustee will be appointed by the court. In some cases, a trustor can serve as the trustee. It is also possible for two or more trustees to serve together, or for both an individual and an organization to act as co-trustees. Separate trustees may also be named to manage different parts of a trust estate.
The beneficiary is the person who is to receive the benefits or advantages (such as income) of a trust. In general, any person or entity may be a beneficiary, including individuals, corporations, associations or units of government.
The general duties and obligations of the beneficiary, the trustee and the trustor are summarized elsewhere in this pamphlet.
What are the duties and responsibilities of a Trustee?
A trustee - whether an individual or institution - holds legal title to the trust property and is given broad powers over maintenance and investment. To ensure that these duties are properly carried out, the law requires that the trustee act in a certain manner. In general, a trustee must:
The trustee must administer the trust property only for the designated beneficiaries and may not use trust principal or income for his or her own benefit. In other words, a trustee is usually prohibited from borrowing or buying from the trust, from selling his or her own property to it, and from using the trust assets as collateral for a personal debt.
In selecting a trustee you should consider the potential trustee's competence and experience in managing business or financial matters and the potential trustee's availability and willingness to serve.
Individuals and certain corporations (or a combination of both) may serve as trustee. Each selection offers distinct advantages and drawbacks that should be considered. For example, an institution, such as a bank, usually offers specially trained managers to provide administrative, counseling and tax services. Other typical advantages include the institution's continuity and reliability of service, and its ready availability. Most banks charge a fee for trust services, and some may not want to manage small trusts, so you may want to compare options.
As an alternative, an individual, such as a relative, family friend or business associate, may serve as trustee. An individual, unlike an institution, may be willing to serve for little or no fee. Furthermore, this person could add a more personal touch for special understanding to the needs of the beneficiaries. However, you will want to be certain that any nominated individual has the skill and experience necessary to properly manage the trust property.
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