Settlor
What Is a Settlor?
A settlor is the person who creates a trust by transferring assets into it and establishing the rules that govern how the trust will operate. The settlor determines how the trust’s assets will be managed and distributed to beneficiaries.
The settlor is sometimes referred to as the trust creator or trustmaker.
Why It Matters
The settlor plays a key role in estate planning by structuring the trust according to personal financial and family goals. By establishing a trust, the settlor can control how assets are managed and distributed, potentially avoiding probate and providing long-term financial protection for beneficiaries.
Trusts can also provide tax planning benefits and asset protection depending on how they are structured.
How a Settlor Works
To create a trust, the settlor:
- establishes a trust agreement
- transfers assets into the trust
- names a trustee to manage the assets
- identifies beneficiaries who will receive distributions
Once assets are placed in the trust, the trustee manages them according to the terms set by the settlor.
Example
A parent creates a trust to hold assets for their children and appoints a trustee to manage the funds until the children reach adulthood. The parent who created the trust is the settlor.
Settlor vs Trustee
- The settlor creates the trust and defines its rules.
- The trustee manages the trust assets according to those rules.
FAQs About Settlors
Can a settlor also be a trustee?
Yes. In some trust structures, the settlor may initially serve as trustee.
Does a settlor control the trust after it is created?
Control depends on the type of trust and its legal structure.
Are settlors always individuals?
Most settlors are individuals, but organizations may also create trusts in some circumstances.
Related Terms
