Who Is a Settlor in a Trust?

A settlor, also known as a grantor or trustor, is the individual who creates a trust by transferring assets into it for the benefit of beneficiaries.

It is Settlor ☑ and not Settler ☒!

Don’t be confused with the term settler, it means who has immigrated and settled.

The process of creating a trust involves the settlor drafting a trust document, which outlines the terms and conditions of the trust, names the trustee who will manage the trust assets, and specifies the beneficiaries who will receive the benefits of the trust.

The role of the settlor is pivotal in the formation of the trust.

They determine the purpose of the trust, which can range from providing for a family member’s education to charitable giving, estate planning, or asset protection.

The settlor’s intentions and instructions are documented in the trust deed, a legal document that governs the operation of the trust.

One key aspect of the settlor’s role is the initial funding of the trust. This involves transferring assets, such as cash, real estate, or securities, into the trust. Once the assets are transferred, they are no longer owned by the settlor; instead, they are owned by the trust and managed by the trustee according to the terms set forth by the settlor.

The settlor has significant discretion in designing the trust, including setting conditions for how and when the beneficiaries will receive their benefits. For example, a settlor might create a trust that provides for a child’s education expenses until they reach a certain age, at which point the remaining assets are distributed to the child outright.

It’s important to note that the settlor’s role typically ends once the trust is established and funded. While they can sometimes retain certain rights, such as the power to amend or revoke the trust (in the case of a revocable trust), in many instances, the settlor steps back, and the trustee takes over the responsibility of managing the trust assets in accordance with the trust document.

In summary, the settlor is the architect of the trust, setting its foundation, purposes, rules, and guidelines. Their role is fundamental in ensuring that the trust operates smoothly and fulfills its intended purpose, providing benefits to the designated beneficiaries according to the settlor’s wishes.