Definition
A trustor is the person or entity that establishes a trust by transferring assets to a trustee, who then manages these assets for the benefit of the trust’s beneficiaries. The trustor can create different types of trusts such as living trusts, testamentary trusts, and land trusts, each serving varying purposes including estate planning, asset management, and real estate collateralization.
In real estate, the term also applies to an individual who gives a deed of trust as collateral for a loan. In this scenario, the trustor is the borrower, the lender is typically referred to as the beneficiary, and a trustee holds the property’s legal title until the loan is repaid.
Examples
- Family Trust Example: John Doe sets up a family trust and transfers his home and some investment properties into the trust. He names his spouse as the trustee and his two children as the beneficiaries.
- Deed of Trust Example: Jane Smith wants to secure a loan to purchase a commercial property. She issues a deed of trust, naming the lender as the beneficiary and transferring the property title to a trustee as collateral for the loan.
- Business Trust Example: A company wants to create a retirement plan for its employees. The firm, as the trustor, sets up a land trust and transfers several commercial properties into the trust, designating an external entity as the trustee and the employees as beneficiaries.
Frequently Asked Questions (FAQs)
What is the primary role of a trustor?
The primary role of a trustor is to establish a trust by transferring assets to a trustee, who manages and administers those assets according to the terms of the trust agreement, for the benefit of the trust’s beneficiaries.
Can a trustor also be a trustee?
Yes, a trustor can also serve as a trustee, especially in living trusts, where the same person often acts as trustor, trustee, and beneficiary during their lifetime.
What happens if a trustor dies?
If the trustor dies, the trustee continues to manage the trust according to the terms specified in the trust agreement. If the trustor was also the trustee, a successor trustee generally takes over the responsibilities.
How is a trustor different from a trustee?
The trustor is the individual or entity that creates the trust and transfers assets into it. The trustee is the party responsible for managing and administering those assets in line with the trust agreement’s terms.
Can a trustor revoke a trust?
It depends on the type of trust. A trustor can revoke a revocable trust at any time, but an irrevocable trust generally cannot be altered or revoked once it is established.
What is a deed of trust in real estate?
A deed of trust is a legal document in real estate that involves three parties: the trustor (borrower), the beneficiary (lender), and the trustee (an independent third party). It functions similarly to a mortgage and acts as a security for the loan.
Related Terms
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Trustee: An individual or institution managing the assets placed into the trust by the trustor.
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Beneficiary: The person or entity for whom the trust was established and who benefits from the assets held in the trust.
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Deed of Trust: A document in real estate that secures a loan with property as collateral.
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Revocable Trust: A type of trust that the trustor retains the right to amend or revoke.
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Irrevocable Trust: A type of trust that cannot be modified or terminated without the consent of the beneficiaries.
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Living Trust: A trust created during the trustor’s lifetime, also known as an inter vivos trust.
Online Resources
References
- Investopedia. “Trustor Definition.” Retrieved from https://www.investopedia.com/terms/t/trustor.asp
- Nolo. “Trustors and Settlors Overview.” Retrieved from https://www.nolo.com/legal-encyclopedia/trustors-and-settlors-overview-31442.html
- The Balance. “Deed of Trust Basics.” Retrieved from https://www.thebalance.com/deed-of-trust-basics-1798706
Suggested Books for Further Studies
- Living Trusts for Everyone: Why a Will Is Not the Way to Avoid Probate, Protect Heirs, and Settle Estates by Ronald Farrington Sharp
- The Trustee’s Legal Companion: A Step-by-Step Guide to Administering a Living Trust by Liza Hanks and Carol Elias Zolla
- Trusts & Estates by Bridget J. Crawford, Karen E. Boxx, and John R. Price
- Make Your Own Living Trust by Denis Clifford
- Drafting California Revocable Trusts by Shepard’s/McGraw-Hill
