Trustors and Trustees
Two important roles in a living trust to understand are:
- Trustors create the living trust and are the initial beneficiaries.
- Trustees manage the living trust for the beneficiaries.
Both roles play an important part in the initial stages of your trust and they are often the same people. Most people who create a trust name themselves as both the trustor and initial trustee. Married couples, common law couples and same-sex couples can name themselves as co-trustors and co-trustees.
By naming themselves as both trustors and initial trustees, creators of a trust maintain control of their assets just as before creating the trust.
The trustor (also known as a grantor or settlor) is responsible for appointing people in different roles for the trust and is the only person able to change language in the trust.
The trustor at any time can amend the trust or revoke (terminate) the trust. If co-trustors have created a trust and both are living, both must agree to any changes. If one trustor has passed, the surviving spouse can continue making amendments except to portions that may have become irrevocable when the first spouse passes (this typically applies to A-B trusts with blended families or estate tax considerations).
There are no successor trustors. Hence, when the trustor (or second trustor if co-trustors) passes, the trust's language can no longer be changed. The living trust at this point becomes irrevocable.
During the trustor's lifetime, he or she can add and remove assets from the trust at any time. Adding assets does not require any formal amendment. Non-titled assets are automatically added while titled assets only require the trust name to be listed as the owner to transfer into the trust.
When the last trustor passes, the distribution clauses of the living trust are triggered. At this point, the successor trustees take over and follow the deceased trustors' rules for distribution of the estate.
Trustees are the daily managers of all assets in the trust and must manage these assets in the best interests of the current beneficiaries. The initial beneficiary of the trust is the trustor.
Typical daily activities of Trustees include:
- Putting money in a bank
- Withdrawing money from a bank
- Purchasing groceries for the Trustor(s)
- Buying / selling real estate, cars, etc.
- Borrowing / lending money
- Purchasing insurance
- Any financial activity you engage in regularly
If the initial trustee(s) is unable to act, then successor trustees take over until the initial trustee is able to resume the duties. When the initial trustee(s) has passed, the successor trustees step in. If the trustor has passed, the successor trustee is responsible for the transition of the estate to the beneficiaries.
Both the initial trustees and successor trustees have aact as a fiduciary, meaning they are legally responsible for acting in a responsible manner. If a beneficiary thinks the trustee is acting reckless or negligent, a judge can hold that trustee accountable if sufficient evidence exists of wrongdoing.
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