If you’re new to the world of estate planning and trust creation, you probably have a lot of questions running through your head. One of the most common we receive here at The Law Office of Raymond E. Brown is in regard to the difference between a trustor vs trustee. Understanding these roles is necessary to help you protect your property, manage your financial accounts, and distribute assets according to your wishes.
Attorney Raymond E. Brown, a seasoned estate planning attorney based in Annapolis, Maryland, regularly helps clients with drafting and executing trusts. With years of experience in this particular field of law, he knows the common questions (and fears) of those who are looking to build out their estate plan, and he is ready and willing to provide all of the answers they need to stay confident and well-informed throughout the process.
Read on to learn more about the differences and responsibilities of a trustor vs trustee and what it means for your estate plan, or give us a call at (443) 554-9944 to speak directly with a member of our team today.
What is a Trustor?
A trustor, also known as a trustmaker, grantor, or settlor, is the person who creates a trust. The trustor decides how their assets, including personal property and financial accounts, will be managed and distributed. By establishing a trust, the trustor gains more control over their assets and can specify detailed instructions on how they should be handled, including paying taxes and fulfilling their fiduciary duty.
Common reasons for creating a trust include:
- Asset Protection: Safeguarding your property from creditors and legal claims.
- Estate Planning: Guaranteeing your assets are distributed according to your wishes.
- Avoiding Probate: Bypassing the lengthy probate process.
- Tax Benefits: Potentially reducing estate taxes and providing tax advantages for your beneficiaries.
If you’re interested in creating a trust, speaking with an Annapolis trust lawyer at the Law Offices of Raymond E. Brown can help make sure you understand all of the ins and outs as well as ensure that these documents are properly drafted and all legal duties are fulfilled.
Responsibilities of the Trustor
The trustor has several key responsibilities that are important for establishing and maintaining a trust. These include:
- Creating and Funding the Trust: Setting up the trust and transferring assets into it.
- Defining the Terms and Conditions: Outlining how the trust’s assets should be managed and distributed, including instructions for multiple beneficiaries.
- Selecting the Trustee and Beneficiaries: Choosing who will manage the trust and who will benefit from it.
What is a Trustee?
A trustee is the person or entity responsible for managing the trust’s assets according to the trustor’s instructions. This role requires a high degree of fiduciary responsibility (legal duty) and a commitment to act in the best interest of the beneficiaries. The trustee’s job involves handling various tasks, such as responding to a particular event that affects the trust.
When selecting a trustee, the trustor should consider several important qualifications and criteria. For example, an ideal trustee should have experience in financial management, investments, and tax filings.
Trustworthiness and integrity are also necessary qualities. The trustee must be reliable and honest in managing the trust assets responsibly and fulfilling their legal duties.
Duties and Responsibilities of a Trustee
The trustee has several important duties and responsibilities that are required to manage the trust properly. The trustee’s duties include:
- Managing and Investing Trust Assets: Verifying the trust’s assets, whether part of a revocable trust or an irrevocable trust, are properly invested and maintained, which includes maintaining records of all transactions and investments.
- Acting in the Best Interest of the Beneficiaries: Making decisions that benefit the beneficiaries and adhering to the terms. The trustee cannot remove assets from the trust for personal gain.
- Adhering to the Terms of the Trust Document: Following the instructions laid out by the trustor without deviation, especially after the trustor’s death, to ensure their wishes are executed exactly as specified. This includes paying debts and distributing assets to the appropriate beneficiaries.
What is a Successor Trustee?
A successor trustee steps in if the initial trustee can no longer fulfill their duties due to incapacity, resignation, or if they pass away. This makes certain the trustee role is maintained, providing continuity in the management of the trust.
How Many Trustees Can a Trust Have?
A trust can have a single person or entity or as many trustees as needed. Regarding co-trustees or multiple trustees, decisions typically require a majority decision or unanimous agreement, depending on the trust agreement. The trust agreement should clearly outline the process for making decisions to avoid any confusion.
What is a Trust Beneficiary?
Trust beneficiaries are individuals or entities designated to receive the benefits of the trust. This might include family members, friends, or charitable organizations. The trust document specifies how and when the trust assets should be distributed to the beneficiaries.
Trustee vs Beneficiary
While the trustee manages the trust assets, the beneficiaries receive the benefits. A clear distinction between these roles helps to maintain the trust’s integrity and purpose. Trustees have a fiduciary duty to act in the best interests of the beneficiaries and manage the trust assets responsibly.
Can a Beneficiary Be a Trustee?
Yes, a beneficiary and trustee can be the same person in Maryland. However, this arrangement can lead to potential conflicts of interest. To avoid any issues, the roles and responsibilities of trustees must be clearly defined in the trust document.
A trustee who is also a beneficiary must be particularly diligent in managing the trust assets impartially and in the best interest of all beneficiaries to prevent any perceived or actual conflicts of interest.
Check out our blog for some helpful tips for selecting beneficiaries and trustees.
Need Help Establishing or Managing a Trust in Maryland? Call Our Annapolis Estate Planning Attorneys Today
At The Law Offices of Raymond E. Brown, our experienced Maryland estate planning attorneys offer comprehensive services to help you with all aspects of trust creation and management, including but not limited to:
- Trust Creation and Drafting: We can help you establish a revocable living trust or an irrevocable trust tailored to your needs.
- Trustee Support and Guidance: We assist trustees in fulfilling their fiduciary duties and managing trust assets effectively.
- Conflict Resolution and Litigation Support: If disputes arise, our experienced attorneys provide litigation support to resolve conflicts.
If you’re considering establishing a trust or need assistance managing an existing one, our experienced law firm is here to help you make informed decisions regarding your unique legal arrangement.
The best time to start protecting your assets and ensuring your loved ones are taken care of is right now. For personalized advice and detailed information, reach out to The Law Office of Raymond E. Brown today. We are here to guide you through your fiduciary responsibilities and confirm your trust documents support your final decisions.
Simply call (443) 554-9944 or reach out online today to schedule a confidential consultation.
