01 Dec Who Are The People Involved In A Trust? Justin Crain, Partner
Every trust has one or more settlors, trustees, and beneficiaries. The Settlor is typically the person who sets up the trust. The person who sets up a living trust is called the
settlor, grantor, or trustor. If a married couple creates a trust together, it is a joint trust and both are considered the settlors of the joint trust. The settlor creates the trust document that contains all of the terms, conditions, and directives of the trust.
The trustee is the individual or individuals who have the power over the trust property. The initial trustee may be the person or people who established the trust. If you and your spouse set up the trust together and elect to stay in charge together, then you are considered co-trustees. When one spouse dies in this scenario, the other will become the sole trustee. The person or people who make the trust work after you die, or after you and your spouse die if you are co-trustees, is called the successor trustee. The primary responsibility of the successor trustee is to
distribute trust property to the beneficiaries who were named and according to the terms detailed in the trust document. This individual (or these individuals) should be someone you feel is trustworthy and capable of doing this important job.
Beneficiaries are the people or organizations you choose to inherit your trust property. The beneficiaries of the trust can be anyone you desire and you can leave each beneficiary whatever trust property you wish. Beneficiaries can be income and/or principal beneficiaries. An income beneficiary will receive everything that is earned by the principal of the trust, such as stock dividends, interest earned on bank accounts, rent from real estate owned by the trust, and earnings received from a business the trust owns. In contrast, a principal beneficiary will receive the principal or assets of the trust at some future date.
In many trust arrangements, the parents are the settlors, the initial trustees and the first income beneficiaries. A successor trustee or co-trustees are designated (often an adult child or children) and the children are designated as the principal beneficiaries to receive the trust assets after the parents die. When the parents pass away, the trust assets are not frozen and trust assets do not have to go through the court probate process to be transferred. The trust instrument and Texas trust law permits the successor trustee to distribute the trust assets in accordance with the
instructions provided in the trust agreement.