Difference between Grantor and Trustee

January 19, 2017 by Editorial Team

A trust agreement is a legal document that provides instructions on how a property held in trust is supposed to be handled for its beneficiary. Aside from the beneficiary, the grantor and the trustee are important people who play equally significant roles in this legal undertaking. Let’s take a closer look at these two.

Definitions

Grantor vs Trustee
A grantor transfers his property to a trust

In estate management, a grantor (i.e. trustor, settlor) is the individual who sets up the trust agreement and provides the terms and conditions of the trust. The grantor holds the legal authority to transfer property into a trust. A trust can either be one that is modifiable at any time (revocable trust), or one that is not subject to any revisions. The Uniform Trust Code holds that all trusts are revocable unless stated otherwise in the terms and conditions of the trust. In most cases, the grantor is charged with the responsibility of initially funding the trust. Funding may come from deeds, security certificates, or tangible properties with no formal title.

Trusts are typically designed to have a single grantor to avoid any complications that may come up. There are instances when a grantor assigns himself as the beneficiary of a living trust, given that another party acts as the trustee.

trustee

The trustee (e.g. executor) is the person appointed by the grantor to take charge of managing the trust. A trustee can be just one person or a group of people. An individual nominated as a trustee holds the right to decline the appointment or drop the role completely. The grantor has the authority to remove the third party trustee in a revocable trust. The trustee may also be relieved of his duties if it has been stipulated as an option in the trust agreement. In instances where an irrevocable trust is in effect, the beneficiaries can replace the trustee with a majority vote if granted by the trust instrument. Without this provision, only a court action can remove a trustee. The name of the trustee, including the successor, must be clearly indicated in the trust instrument.

The trustee is expected to handle the property or assets in a way that would best serve the interest of the beneficiaries. A trustee may also be an organization that is accredited federally or by the state (e.g. banks, trust companies). Corporate trustees usually integrate their fiduciary organization into their private banking groups or investment management teams. It is also possible to have an individual trustee work in conjunction with a bank trustee. Unless expressed otherwise in the trust agreement, both shall perform the same role in a legal capacity.

Trustees are mandated to work with unquestionable integrity and good faith, as they basically manage the trust. They are charged with collecting trust assets and receipts from trust investments. They manage the expenses of the trust, defend and enforce claims on its behalf. It is also the trustee’s duty to distribute the amount (if any) to the beneficiaries as stated in the trust agreement.

Grantor vs Trustee

So, what’s the difference between a grantor and a trustee? The responsibilities of each one is distinct and clear-cut. The grantor initiates the trust agreement and states all the terms and conditions contained therein. The trustee may be a person or a group of people appointed by the grantor to handle all trust property affairs.

Comparison Chart

GrantorTrustee
Initiates the trustManages the trust
Initially funds the trustHandles the funds of the trust
An individualAn individual or a corporation

Video

If you don’t mind cheesy intro music, check out this YouTube video about grantors, trustees and beneficiaries.