With many people’s familiarity with terms such as “executor” or “personal representative,” clients are often confused when we discuss a revocable trust as an estate planning instrument and they hear new terms such as “trustor”, “trustee”, and “beneficiary.” Below we are going to discuss these different parties to the revocable trust and explain their individual roles.
The trustor, which is sometimes called the “settlor” or “grantor,” is the person who creates the revocable living trust. As you may suspect the trustor (i) defines the trust’s management, (ii) chooses who will act as successor trustee (discussed below), (iii) decides who will receive the benefit of the property in the trust after trustor dies, (iv) decides what property is going to be subjected to the trust’s management, (v) funds the trust, (vi) ensures the trust’s terms are kept current and consistent with the laws of the state where the trust is administered, and (vii) adjusts the post-death provisions to reflect the trustor’s current wishes. Further, there may be other obligations of the trustor, but these are the core responsibilities of this party.
Trustee (and Successor Trustee)
The trustee is the person charged with managing the assets of the revocable living trust. In most revocable trusts, the trustor is the initial trustee until the trustor dies, becomes incapacitated, or steps down from such a role. Once the initial trustee is unable to serve, another person (the successor trustee) will take over the management of the trust’s assets and property. If multiple successor trustees are appointed – which is common – the trust’s management provisions will govern. For example, the trustor may require a unanimous approval if multiple successor trustees are managing the trust or the trustor may require majority approval. The individual trust instrument will usually state the rules that apply in this scenario. Also important to note, the trustee is a fiduciary with enforceable duties to the trustors and the beneficiaries (see below) of the trust. Mismanagement by a trustee is one very common reason for litigation to erupt.
The beneficiary is the person (or persons) that will receive the benefit of the trust property after the trustor dies. The method and frequency by which distributions are made to the beneficiary from the trust are controlled by the terms of the revocable living trust. Therefore, this means that while the trustor is alive, no distribution is made the beneficiary and the trustor has the ability to add or subtract from the beneficiary list.
Ariel Bedell is a Shareholder at The Loftin Firm. For questions relating to any other California real estate, corporate governance, land use, or estate planning matter, contact Ms. Bedell at 760-814-9649.