Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Full Bio →

Written by

UPDATED: Jun 19, 2018

Advertiser Disclosure

It’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

A trust is a legally created entity designed for the protection, growth, and distribution of assets. There are three different roles in a trust, with nearly endless combinations of trust parties. A trust can be created by one person or many, it can be run by anyone the founders choose, and it can benefit a specific person or group of people. Each role in a trust comes with different responsibilities and expectations that must be followed in order for the trust to succeed.

Trust Parties: The Settlor

A trust begins with the owner of the property and assets. This person is known as the settlor. The settlor begins a trust with the intent of holding property and assets for the benefit of someone else. The settlor can place any asset into the trust including real estate, vehicles, investments, savings accounts, and even antique items and art. Depending on the type of trust that the settlor creates, he or she will owe a certain amount of gift tax for transferring the assets into the trust.

The settlor also has the responsibility of determining who will benefit from the assets. Under current law, it is vital that the settlor choose a specifically mentioned person or group of people. While most trusts are designed for the benefit of a settlor’s heirs, the settlor can also name a specific church or charity to benefit from the trust. Once the gift tax is paid and the trust papers filed, the trust is considered active and the settlor’s role is for the most part complete.

Get Legal Help Today

Find the right lawyer for your legal issue.

 Secured with SHA-256 Encryption

Trust Parties: The Trustee

Once the trust is established, the trustee takes over the care of the trust. The trustee is a person specifically named by the settlor to care for and expand the assets of the trust. The trustee has the right to do whatever is necessary with the assets to grow the trust. For example, trustees may rent out real estate in order for the property to bring in income. If there are antiques or artwork in the trust, the trustee may loan the pieces out to a museum for a specific amount. Trustees can also choose how to invest any money that is in the trust by forming a portfolio.

The trustee must act prudently with the trust funds. If the trustee does not act prudently and money is lost, it is the trustee who must pay the trust back. Depending on who the trustee is and how much time and effort the trustee spends on the trust, he or she may be compensated for his or her time out of the trust’s funds. The trustee remains in charge of the trust until the trust’s funds are exhausted, the trustee is removed, or the trustee dies.

Trust Parties: The Beneficiaries

The final parties to a trust are the ones receiving the benefit of the trust. These people are known as beneficiaries. The beneficiaries of the trust have two roles. First, they receive payments from the trust and make necessary tax adjustments resulting from the payments. Second, the beneficiaries audit the trust annually to verify that the trustee is being responsible with the funds. If the trustee is spending the funds inappropriately, or improperly investing the funds, then the beneficiaries are responsible for removing the trustee and replacing that trustee with another who will run the trust properly.