What's the difference between a settlor and grantor?

Settlor and grantor are two different names for the person who creates a trust.

Elissa

By

Elissa Suh

Elissa Suh

Personal Finance Editor

Elissa Suh is a senior editor of estate planning at Policygenius in New York City. She has researched and written extensively about wills, trusts, and personal finance since 2019, with an eye towards making difficult (and at times gloomy) topics easy to understand for readers. Her articles and data stories has been cited by the likes of MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

Published March 4, 2021|2 min read

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Table of Contents

The settlor and grantor are both terms that refer to the person who creates a trust. As part of an estate plan, the settlor/grantor transfers assets into a trust for the future use of their beneficiaries. It's important to familiarize yourself with these terms, which you may encounter during the process of setting up a trust as you deal with paperwork, documents, and legal professionals.

A trust is a separate legal entity and it can be a safe and secure way to leave an inheritance for loved ones. Trust assets can typically avoid probate, too, unlike assets you pass along through a will

Key Takeaways

  • The grantor or settlor creates a trust and outlines how it works in the trust agreement

  • The settlor or grantor can also be a trustee or beneficiary depending on the trust and its purpose

Settlor vs grantor

Settlor, grantor, and trustor are synonyms for the trust creator. Certain people may prefer to use one term over another, but they all mean the same thing. The settlor is responsible for funding a trust with assets and laying out a plan for what happens to them — who receives them and when — in their trust document.

When the settlor opens a trust during their lifetime, it's called a living trust or inter vivos trust. They can also create a trust upon their death, called a testamentary trust, through the terms of their will.

The trust may provide the settlor/grantor with tax advantages or asset protection from creditors depending on whether they open a revocable or irrevocable trust. Because they own trust property differently for legal and income tax purposes with each type of trust, the settlor may have additional restrictions or rules they must follow.

Learn more about a revocable vs irrevocable trust

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Grantor vs beneficiary

The settlor appoints someone to receive the trust assets is called a beneficiary, and they can be a person, organization, or business. The beneficiary can receive assets upon the settlor’s death or receive money throughout the settlor’s lifetime, like with a trust fund

With some trusts, the settlor-grantor can also be the beneficiary of their own trust and receive the trust income.

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Grantor vs trustee

Settlors must also appoint someone to manage the trust, called the trustee, and a successor trustee to take over after the trustee dies or is unable to fulfill their duties.  The trustee’s responsibilities include filing and paying trust taxes, managing trust assets, and administering the trust. 

While they’re alive, the settlor commonly opts to act as trustee of their revocable trust, which they can amend or revoke, but they must choose someone else if they have an irrevocable trust, which is not so easily dissolved. When the grantor acts as trustee, this is sometimes called a grantor trust

Learn more about a trustor vs trustee