Generally, an executor administers the estate of the person who died, while a trustee administers a trust for the benefit of the named beneficiaries.
Controlling Persons of a trust, means the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership).
In a trust, assets are entrusted to a trustee who holds legal title and manages the assets until they are distributed to the eventual beneficiary.
This is a fundamental concept of trust law: the separation of legal and equitable title. In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries.
Beneficiaries of trust generally fall into two categories. One type of beneficiary is ultimately entitled to take ownership and control of trust capital and the income it generates as outlined in the trust agreement.
Trustee: Trustees often have more ongoing authority, especially in the case of living trusts or long-term trusts. They may manage and distribute assets over many years, depending on the terms of the trust.
The trustee is the person who controls property inside of the trust and handles investment of trust property. The trustee is responsible for carrying out the terms of the trust agreement.
A trust is a fiduciary1 relationship in which one party (the Grantor) gives a second party2 (the Trustee) the right to hold title to property or assets for the benefit of a third party (the Beneficiary).
Once you die, your living trust becomes irrevocable, which means that your wishes are now set in stone. The person you named to be the successor trustee now steps up to take an inventory of the trust assets and eventually hand over property to the beneficiaries named in the trust.
WHO IS THE “RIGHT” TRUSTEE? A natural first inclination is to consider a family member or trusted friend who knows you and your philosophies and values well. Family or friends may personally know your beneficiaries and their needs.
Key Takeaways. Funds received from a trust are subject to different taxation rules than funds from ordinary investment accounts. Trust beneficiaries must pay taxes on income and other distributions from a trust. Trust beneficiaries don't have to pay taxes on principal from the trust's assets.
It is not unusual for the successor trustee of a trust to also be a beneficiary of the same trust. This is because settlors often name trusted family members or friends to both manage their trust and inherit from it.
A person is presumed to control a trust if the person is a trustee or managing agent of the trust.
An executor does not possess the power to overrule or change the terms established by a trust; these roles carry separate responsibilities. An executor's role consists of overseeing and closing an estate as per its will's instructions without disrupting or interfering with their independent functions as trustee.
All in the family
In most instances, clients select family member trustees for both emotional and financial reasons. Clients may believe that a family member will have an emotional attachment to the beneficiary of the trust and as trustee will stick with the job, come what may.
The one establishing a trust is called the trustor or grantor. The one who oversees and manages the trust is called the trustee. In a revocable trust, the trustor may control the trust as well, but in an irrevocable trust, the trustee must be somebody else.
Once appointed, the Executor “runs” the estate much as a business person runs a business. The Executor makes sure all debts are paid, all taxes paid, all assets cared for, then distributes the remaining assets to the beneficiaries in accordance with law and the Will.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
The trustee manages the trust and distributes its assets at a prescribed time. The trustee is in charge of managing the assets in an irrevocable trust while the grantor is still alive.
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
That may not always happen, but that's the way it's supposed to work under California Trust law. The bottom line: Beneficiaries enjoy the Trust assets at some point but, until then, they do not control or manage those assets.
While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.
A trustee acts as the legal owner of trust assets and is responsible for handling any of the assets held in trust, tax filings for the trust, and distributing the assets according to the terms of the trust.
The trustee must act solely in the interest of the beneficiaries, avoiding conflicts of interest and self-dealing. Any breach of this duty can result in personal liability.