IMPORTANT ROLES IN A TRUST
There are three parties central to the creation of a trust, each with a unique role to play.
The Grantor is the creator of the trust. This person has built an asset base and wants to ensure that those assets are distributed according to his or her wishes. The grantor does not have to be significantly wealthy or have a large number of properties or assets. The grantor may be a parent with a large life insurance policy who wants to guarantee that his or her children are provided for without receiving a large sum of cash all at once.
The grantor has ultimate control in setting up the trust: determining which assets will be transferred into trust; who will serve as trustee while he or she is living and after his or her death; and how the trust property will be administered during or after his or her lifetime.
The grantor also specifies the purpose of the trust; if and by whom it may be altered; powers given to the trustee; and when disbursements are to be made. In some cases, the creator of the trust may also name himself as co-trustee to be responsible in part for administering the trust. The grantor must be legally competent when the trust is created.
The trustee is responsible for managing and administering the trust and strictly adhering to the terms of the trust as well as applicable state law in performing its duties. The trustee must be legally competent to accept the trust property he or she is to manage.
The trustee is held to strict fiduciary standards. This ensures that the trustee can only use assets from the trust property for the beneficiaries, not for the trustee’s benefit.
This person or group of people benefits from the trust, eventually receiving some or all of the property placed in the trust. While the trustee holds the “legal title,” beneficiaries have the “equitable title,” meaning that the assets should be used for their benefit as stipulated in the trust document. The beneficiaries of the trust must be clearly identified or ascertainable. This could be something such as naming all current beneficiaries and then allowing for the inclusion of others born after the trust’s inception.
Current beneficiaries are entitled to receive current income or principal distributions from the trust either at the discretion of the trustee, or as required by the terms of the document. Remainder beneficiaries are those beneficiaries that succeed the interest of the current beneficiaries. In many cases, the principal of the trust is distributed to remainder beneficiaries. A beneficiary can be a person or an institution.