Did you know of this popular case from a US probate court? A father left a trust for her three daughters (beneficiaries). The youngest was made the trustee. The two elders got jealous and abused her.
Then she took revenge by mismanaging the trust, depriving the two sisters of their legit dues!
Hi! If you’re keen to look beyond the jargon to get to the roots of the case, I’ll help you. You only need to know the difference between trustor vs trustee!
- The trustor creates the trust and assigns an asset (real estate)
- The trustee looks after the trust, following the instructions of the trustor
- Beneficiary(s) is the person for whom the trust was created.
The US has more than 580,000 real estate trusts managed by trustees. Certainly, trustor vs trustee cases are also common here! When the trustee breaks the trust of beneficiaries and the trustor, it is not only distressing but illegal as well.
What to Expect:
In this article, I will break down the duties and responsibilities of trustors and trustees to the basics. Moreover, I will get into how trustees manage a trust. Lastly, I will explain the factors that mostly go down in the trustor vs trustee cases. So, keep reading………..
What is a Trust?
What is a trustor vs trustee conflict? It is a feud over how they manage or enjoy the trust. But what is a trust?
Barring jargon, a trust is a legal entity. The trustor creates the trust to hold assets. You can also benefit from an asset without any probation in real estate. Don’t treat trust like an old man’s last will or any testament.
Can an executor decide who gets what? No! Similarly, trustees cannot decide that too.
Meanwhile, transitioning your part of an asset from a will may be challenging. There are many legal steps involved. But not in the case of trusts. They ensure smoother asset transition.
What is a Trustor?
Trustors create a trust. They can be individuals or organizations. In most cases, a trustor creates the trust and ascribes the assets to it. Mostly, trustors choose the beneficiaries as well.
Let’s go back to the example we started with. The father set up a trust. He also chose his three daughters as beneficiaries of the trust. After that, he put assets in the trust. It comprised his business, bank balance, and physical properties.
Roosevelt once said- Real estate can be…..”Purchased with common sense, paid for in full, and managed with reasonable care,…..it is about the safest investment in the world.” So, real estate trustors have got added responsibilities to care for.
Did You Know?
Did you know you can be real estate trustors, too. The Real Estate Investment Trust is a company that owns, manages, and finances real estate projects. It is a public trust where you can invest.
You don’t have to buy the property or procrastinate if my property’s price will double in the coming 20 years or so. Just choose any publicly traded REIT. Contact a reliable broker and buy the shares.
Best REITs to Buy for 2025
If you are new here, don’t panic! I’ve got you covered. My first choice for you would be American Tower Corp (AMT).
Investing in this asset can earn a dividend yield of 3.3%. My other suggestion is Realty Income Corp (O). Of now, this asset is giving trustors a yield of 5.6%.
Duties of a Trustor
Trustors create an asset. Without them, a trustee or beneficiary has no place at all. If you are planning to invest in or buy a trust (public or private), you must know your primary duties:
1. Choose Your Trustee: I recommend trustors choose their trustee first. But be careful! A loyal trustee is not enough. The person must know how to manage, maintain, and increase the valuation of the property.
It includes choosing your successor trustee if you are incapacitated. In other words, if someone cannot look after the property, they bought due to frail health or death, the successor trustee will step in by default.
2. Select Your Beneficiary: If I am investing in a public real estate trust, you can’t choose your beneficiary. But you can decide who would benefit from your assets, if you have a private real estate trust.
3. Make the terms: I believe a trustor should always set the terms. For example, document who will receive an asset and when. If you’re leaving behind your son or daughter as the beneficiary, you can set an age bar.
The assets will be theirs, when they are of that age.
What is a Trustee?
While you already know what a trustee is, let me brief you more! A trustee is a person or agency taking care of real estate, not his own.
When the time comes, the beneficiary will assume sole responsibilities and ownership of the asset (real estate).
Until then, a trustee will do everything possible to manage the estate and improve its asset value, including proper trust accounting.
Can I Really Trust a Trustee?
Well, they are called “Trustee” for a reason. That apart, a trustee is legally bound to act in the best interests of the asset. The trustee also holds the “legal title” of an asset. In other words, the trustee can make any call regarding the asset.
However, 11 U.S. Code § 704 says the trustee’s powers are not theirs. The Trust Act of 2021 laid down the US Trustee Program, a vigilance body to track and defend all trustee frauds.
In fact, there’s the Trust Indenture Act of 1939 also. It says a trustee can sell, offer to sell, or announce a real estate sale. However, The Trust Act of 2021 oversees every beck and call of the trustee.
The bottom line is that you can trust your assets with the trustee.
Duties of a Trustee
Before appointing a trustee, you must know about three particular duties that they will perform:
- Starting with acting as a fiduciary, they must confirm that they are managing the property as the trustor wanted
- Keep the assets safe and record any business, revenues, or monetary, linked to the real estate. Also, loop in a real estate attorney to ensure all actions are legal
- Make real estate decisions or changes if the same aligns with the trustor’s wishes.
Difference Between Trustee and Trustor
Trustor vs trustee real estate battles are livid and real! Until you know where they can go wrong, it will be difficult to understand the differences between them.
For better understanding, I would like to refer to the Giraldin v. Giraldin (In re Estate of Giraldin), No. G041811 case. The trial court, the Court of Appeals, and The Supreme Court gave antipodal decisions.
The claimants and beneficiaries reported that the trustee allegedly breached fiduciary duty. They claimed the trust could be revoked while the trustor was still alive. Meanwhile, the Court of Appeal overturned the decision.
It was held that the trustee is liable to the trustor only, especially when he’s alive. But the Supreme Court passed a groundbreaking judgment, which lays down the trustee vs trustor definition.
The trustee reduced the trust’s value, which is against the trustor’s wishes. On that note, beneficiaries have a stand from where they can sue for breach.
The bottom line- a trustee has irrevocable liability towards the trustor, which is unchanging, whether the trustor is living or not.
Let me highlight another case. The KeyStone Law Group Lawyer won this one in favor of the trustor. The claimant alleged that his father, the trustor, was brutally abused by his brother, the elder son of the trustor.
He was the de facto trustee, who was not even the default choice of the trustor as a trustee. However, the same person disinherited the other child (the claimant in this case).
I believe this is a direct violation of the trustor’s original wishes. Hence, a sheer breach of fiduciary duty, without a doubt.
Synopsis
Here’s a synopsis of the main difference of trustor vs trustee:
| Trustor | Trustee |
| Creates the trust | Responsible for managing the trust but often breaches responsibility and acts against the interests of the trustor / beneficiary |
| Maybe an individual or couple or family | Maybe an individual or company |
| Sets the terms of trust but allows the trustee an upper hand to make decisions in the best interests of the trust | Enjoys legal title but is answerable for any changes, loss, or traction to the current real estate. |
| Decides how to distribute the trust assets | Liable to distribute assets as the trustor asks but often found violating the terms and acting in self-interest. |
Can A Beneficiary Be a Trustee?
Yes and no! Baffled? Well, anybody can be a beneficiary or trustee. But the law is not as simple! The same person cannot be the only beneficiary and the sole trustee at the same time.
In other words, I can be a trustee if my father leaves a property for me and my siblings. But I couldn’t act as a trustee if I were the only child. I hope that makes things clear!
I recommend people avoid appointing siblings as trustees. I’ve observed that siblings are trustees and beneficiaries at once in most family matters! But, a recent AmeriPrise article claims that 70% of US siblings fight over inheritance.
Therefore, it is fairer if other family members, paid staff, or trust attorney become trustees to your real estate, instead of one of your children.
What Happens When A Trustor Passes Away?
The Uniform Trust Code mentions that assets are separate from the trustor’s will. You need a probate lawyer to process the will. Meanwhile, the asset won’t have to go through probate. However, a revocable living trust becomes redundant when the trustor dies.
When living, the trustor may assign more or less beneficiaries, change trustee, etc. However, the trustee assumes the absolute legal title upon the trustor’s death.
He is then responsible for running the real estate (asset), striving for better revenues, and following other directions from the trustor (if any). In Where There’s a Will, Eddy, R. Smith says that a trustee’s non-waivable duty is to follow the terms and purposes of the trustor.
The UTC Code Annotated § 35-15-105(b) also says the same. It says that the interests of “the beneficiaries are defined under the terms of the trust.” Hence, the trustee is by no means in a place to violate the terms or act under self-interests.
Create a Safe Trust Now!
By now, I hope you know what a trustor vs trustee feud is. Both play a crucial role in managing a trust. The trustor creates it and leaves behind the terms to maintain it. After that, the trustees assume the legal title and manage the assets.
Don’t mistake trust for a will. The latter is plain and simple. Your written wish on a white paper can be your will. However, you can create trust by court order in the presence of an attorney.
Have more Queries? Creating trust still seems like a challenge? Post your concerns here! I will get back to you!
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