What’s the difference between Settlor and Trustee?

By Patricia Louise Nelson

            In the context of a trust, there is a Settlor and a Trustee.  Often the same person serves in both capacities. These two rolls are quite different.

            The Settlor is the “king of the world” in the context of a trust. The Settlor owns the trust. The Settlor usually reserves the right to amend or revoke the trust. As such, the Settlor says who will be the trustee, who will benefit from the trust assets, and under what circumstances.

            The Trustee is the “worker bee” of the trust.  During the lifetime of the Settlor, the Trustee makes sure the trust assets are used for the benefit of the Settlor. Upon the Settlor’s incapacity, the Trustee continues to ensure the wellbeing of the Settlor. Upon the death of the Settlor, the Trustee gathers the trust assets, pays any debts, sells assets that need to be sold, and distributes the assets per the instructions in the trust agreement. 

            The Trustee must be trustworthy. The Trustee must have skills for dealing with someone else’s money. The Trustee must have time in his or her life to take on the job of managing the assets. The Trustee must be able to say “no” if a beneficiary requests a distribution with which the Trustee disagrees.  In other words, the Trustee must do the work on maintaining and managing the trust.  

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