Trustor: Overview, definition and example
What is a trustor?
A trustor, also known as a settlor or grantor, is the person who creates a trust. The trustor transfers ownership of assets, such as money or property, to a trustee. The trustee then manages these assets for the benefit of a third party, known as the beneficiary.
Why is a trustor important?
The trustor is important because they are the one who sets up the trust and defines the terms, including how the assets should be managed and distributed. Without a trustor, a trust cannot exist. The trustor’s instructions are crucial in ensuring the trustee acts according to the desired terms.
Understanding the trustor through an example
Imagine someone who wants to set aside funds for their children’s education. The person (the trustor) creates a trust, names a trustee to manage the funds, and specifies in the trust document how the funds should be used. The trustee will then handle the funds for the children’s education according to the trustor's instructions.
In another case, a business owner might create a trust to protect their assets from creditors. The business owner (trustor) transfers the assets to a trustee, who will manage the assets until a set time or condition is met.
Example of a trustor clause
"The Trustor hereby transfers ownership of the assets listed in Schedule A to the Trustee, to be held and administered according to the terms set forth in this agreement."
Conclusion
A trustor is the key party in the creation of a trust. By transferring assets to a trustee, the trustor ensures that the assets will be managed according to their wishes. Understanding the role of the trustor is essential for anyone involved in trust agreements, as it ensures clarity in how assets should be handled and for whose benefit.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.