Settlor

A settlor is the person who creates a trust by transferring assets into it and establishing its terms. The settlor decides who the trustee will be, who the beneficiaries are, and how assets will be distributed. Settlors are also called grantors or trustors, and all three terms describe the same role. In practice, the word "settlor" is more common in estate planning, while "grantor" appears more often in tax law contexts.

Think of the settlor as the architect of the trust: they design the structure, select the parties, and step back once the trust is built.

What the Settlor Does

The settlor has three core responsibilities. First, they draft or commission a trust document that spells out the trust's purpose, the trustee's powers, and the conditions under which beneficiaries receive assets. Second, they fund the trust by formally transferring ownership of assets, whether cash, real estate, securities, or other property, into the trust's name. An unfunded trust is a legal document with no practical effect. Third, they designate a trustee and name the beneficiaries.

Once a settlor completes these steps and the trust is funded, their active role typically ends. What happens next depends on whether the trust is revocable or irrevocable.

Settlor's Role in a Revocable Trust

Most living trusts used in estate planning are revocable. In a revocable trust, the settlor keeps the power to amend, modify, or completely revoke the trust during their lifetime. The settlor almost always serves as their own trustee during their lifetime, maintaining full control over the trust's assets. A successor trustee steps in if the settlor becomes incapacitated or dies.

Because the settlor retains control over a revocable trust, it offers no creditor protection and no estate tax reduction. The IRS treats the assets as still belonging to the settlor for tax purposes, which is why revocable trusts are sometimes called grantor trusts.

Settlor's Role in an Irrevocable Trust

An irrevocable trust cannot be changed by the settlor once it is established. The settlor gives up control in exchange for specific benefits: asset protection from creditors, removal of assets from the taxable estate, or eligibility for government benefit programs. Because the assets legally belong to the trust and not the settlor, creditors generally cannot reach them.

The tradeoff is permanent. Once the trust is funded and irrevocable, the settlor cannot claw back assets, change the trustee, or alter the distribution terms without a court proceeding or the consent of all beneficiaries, depending on state law.

Who Can Be a Settlor

Any adult with legal mental capacity can serve as a settlor. State law typically requires the settlor to be at least 18 years old. A settlor may also be a trustee of their own trust, which is the standard setup in a revocable living trust. However, a settlor cannot be the sole beneficiary of an irrevocable trust, because that would eliminate the distinction between the settlor and the trust itself. A trust requires a beneficiary who is a different party from the settlor to serve a legitimate legal purpose.

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