Difference Between A Trustee, Beneficiary, And Trustor

What is the difference between A Trustee, Beneficiary, And Trustor? There are three key roles in any trust arrangement: the trustee, the beneficiary, and the trustor. While the role of each party may overlap to some extent, there are distinct differences between them. Read on!

A Trustee:

A trustee is a person who has legal ownership of any property put into trust. The trustee is responsible for the management and administration of the trust. And also deciding how to invest any funds or property held by it. The trustee will also control access to the funds and must ensure that they are used only by the terms set out in the original trust deed.

Duties of a Trustee:

A trustee has several key duties, including the following:

• Act in the best interests of the beneficiaries.

A trustee cannot simply invest trust funds in a way that benefits themselves or other parties. Their primary duty is to the beneficiaries, which means they must act in their best interests at all times. The trustee may not use trust funds for their purposes. For him or her, trust will always come first.

• Act with care, skill, and diligence.

A trustee must have the necessary knowledge and skills to manage the trust property effectively. They also need to act carefully at all times. Eg taking responsibility for any decisions they make or actions they take while carrying out their duties as trustees.

• Comply with the terms of the trust deed.

The trustee must follow any instructions set out in the trust deed. This will determine how the trust property can be used and by whom. If there are no specific instructions, the trustee must make decisions in the best interests of the beneficiaries.

• Keep accurate records.

The trustee is legally obliged to maintain accurate records relating to the trust and its property. This will include details of any investments, income received, expenses incurred, and all dealings with the trust property. Trustees must also keep these records for a certain period after they have been discharged from their duties.

• Pay any tax liabilities.

Any tax liabilities relating to trust income or property must be paid by the trustee, who is responsible for calculating and paying these taxes.

A Beneficiary:

The beneficiary of a trust arrangement is anyone who is entitled to receive some form of benefit from the trust. This generally means that they are either a named person set out in the trust deed or an individual who has been specified by the current trustees.

The Beneficiary’s Rights:

• The right to information.

All beneficiaries have the right to know how much income they are entitled to receive and when it will be paid. They should also be provided with a copy of any trust accounts and other relevant financial information, such as details of investments held by the trust.

• Right to object to distributions or changes made by trustees.

Beneficiaries also have the right to object to any decisions made by trustees that they believe are not in their best interests. For example, if a trustee wants to make a distribution that would leave the beneficiaries worse off than they were before, the beneficiaries can object to this.

• Right to challenge trustee decisions in court.

If a beneficiary is unhappy with a decision made by trustees, they have the right to take the matter to court.

• A beneficiary is responsible for paying any taxes that are due on their share of the trust income or property.

Trustors

A person who creates a trust arrangement by transferring his or her property is known as a trustor or settlor. The trustor may also contribute further funds or assets to the trust in the future.

When a trust is created, the trustor gives up all ownership and control over the trust property. They can no longer able to make decisions about how it should be used. Instead, these powers are vested in the trustees. Here are some important facts about trustors:

• The trustor retains control over the property during their lifetime if a ‘life interest’ has been created. This allows them to make use of some or all of the trust property until they pass away.

• If a ‘life estate’ is created, the trustor will retain control and possession of the property until their death. At this point, ownership will pass to the beneficiaries.

• A trustor may also be a beneficiary of their trust arrangement. That they would be entitled to receive some form of benefit from the trust property. Either during their lifetime or after their death.

• If the trustor is not a beneficiary, they will have no rights to the trust property and will not be able to receive any benefits from it.

• A trustor can appoint new trustees at any time, as long as they have the legal capacity to do so.

• A trustor can also change the terms of the trust arrangement at any time, as long as the trustees and beneficiaries agree to these changes.

Difference Between A Trustee, Beneficiary, And Trustor – Conclusion

The differences between trustee beneficiary and trustor can often be complex and difficult to understand. If you are considering creating a trust arrangement or becoming involved in one in any way, it is essential to seek legal advice from an experienced trust lawyer.

With their help, you can be sure that the trust arrangement you create will work exactly as you intended it to. The role of lawyers in trusts law is also important, as they can provide expert guidance on all legal requirements and procedures.