Living Trust: Grantor, Settlor, Trustor – what’s the difference?

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A living trust, also known as an inter-vivos trust (Latin for “amongst the living”), is a trust set up by the grantor during their lifetime. The terms grantor, settlor, and trustor all mean “trustmaker,” but we’ll use “grantor,” as it’s commonly used by the IRS. However, “trustor” might be more specific to trusts.

A living trust is revocable, meaning the grantor can change it anytime during their lifetime. Typically, the grantor transfers some or all of their property into the trust. The grantor might also serve as the trustee or choose a family member, an independent professional trustee, or a corporate trustee.

The trust pays income to the grantor and, if directed, to the grantor’s spouse and children. The grantor can also specify how the principal is used. Essentially, the grantor retains full control, which is why the IRS requires the grantor to pay the trust’s income taxes. For more on this, see: What’s the difference between a grantor and non-grantor trust?

After the grantor’s death, the trust can continue to benefit the surviving spouse and children until it terminates, often upon the surviving spouse’s death. Since the trust is funded during the grantor’s lifetime, there’s no delay in paying income to the beneficiaries after the grantor dies. This also saves on estate settlement costs, such as executor and legal fees, which are typically based on the probate estate’s value.


What’s the difference between a grantor and non-grantor trust?

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