There are many reasons to establish a trust, and equally as many roles in setting it up properly. The settlor of a trust is effectively the organiser of the trust. They will settle all details and assign all other roles. Their job is very broad but very important as they need to keep your interests in mind. In this article, we’ll explain the role that the settlor plays in setting up a trust and its terms.
What is a trust?
A trust is fundamentally a legal relationship where one person or company holds property on behalf of another. This is overseen by an individual or group of individuals, known as trustees. Anyone who ultimately receives the property is known as a beneficiary.
Who is the settlor of a trust?
The settlor of a trust can be anyone, whether they’re appointed on a personal or professional basis. The professional settlor can be a trust lawyer or accountant. These people are usually highly adept and can advise on complex issues.
On the other hand, a friend or family member can be a settlor. Some people may prefer this option because they are personally invested in your interests.
However, if a legal complication arises, they usually are not equipped with the knowledge and experience to solve it. Chances are, they will then need to consult a lawyer anyway.
This is why hiring a trust lawyer from the start is usually advisable. It may cost more in the short term, but in the long run it may help prevent foreseeable issues arising as well.
What is the role of the settlor?
The settlor basically sets up the trust for you. They then legally transfer the responsibility of managing the assets to a trustee. While they are treated as 2 different roles, one person can actually fulfil both.
So you could have your trust lawyer be the settlor and then manage your trust as the trustee after. This is ideal because the management of the trust needs to be legitimate and in keeping with the law at all times.
There are two rules which apply to appointing the settlor. Firstly, if you want the settlor to also be the trustee; they can’t be the only trustee. Further, the settlor cannot be the beneficiary. These requirements ensure fairness and that your interests are always protected.
Conclusion
The role of the settlor can be as detailed or as limited as you require. If you want them to solely establish the trust, they can do just that. In the event that you intend for them to establish the trust and also help manage it legally, that can be arranged as well. If you have further questions about setting up a trust, it may be worth contacting a lawyer.
