Understanding the difference between a trustor, trustee and a beneficiary

When we begin working with clients in formalizing their estate plan, one of the first things we do is making sure they understand the process and implications of the various decisions they will make. Basically, we work to help them understand the definitions of terms that will be used as we proceed together through this process.

One of the most common, and important, services that we provide is the creation of a trust for individuals and families. A trust offers many advantages for people concerned with protecting their assets and it is relatively easy to understand how it can be set up and what benefits it affords

The first step in creating a trust is understanding who is involved and what roles they will play in executing the trust. There are three main parties in a trust: the trustor, the trustee and the beneficiary.

The trustor is the person who has the property and assets that will be used to create the trust. They set up the trust and are sometimes also referred to as a grantor or a donor

trustee is the person, organization or an institution that is responsible for managing the trust and administering the assets that are contained in the trust. In some instances, a trustor can also be a trustee. There can be more than one trustee and separate trustees can be named to manage individual parts of a trust. In all cases, a trustee has considerable power in administering the trust and is responsible for maintenance and investment decisions.

The law requires that a trustee act in accordance with the terms of the trust and must act impartially, treating all the beneficiaries in the manner specified in the trust. Trustees are also responsible for maintaining accurate trust records, as well as fulfilling taxpayer duties that include filing returns and paying taxes when required.

A beneficiary is a person or entity who will receive benefits from the administration of the trust. This can include any person named by the trustor, or it may be a charitable institution, a corporation or any other organization designated by the trustor.

Dana and Associates LLC proudly serves Scottsdale, Mesa, Phoenix, Chandler, Old Town, Desert Ridge, Payson and surrounding Arizona communities.