One of the most important roles in a trust is the grantor. Yet, many wonder, What is a grantor and what rights do they have in trusts? A trust’s grantor creates the trust and establishes terms defining how it will work. The grantor decides who should benefit from the trust by naming one or more beneficiaries, and also selects one or more trustees to administer the trust.
At Massingill, we help Texans simplify legal matters like trusts, wills, and estate planning. Our firm offers flat-fee pricing, secure online document access, and clear guidance. We work to make legal processes easier for individuals, families, and business owners alike. Whether you want to protect assets, plan for future generations, or reduce stress for your loved ones, our attorneys provide trusted counsel and practical solutions.
How Trusts Work
A trust is a legal arrangement that owns property managed by someone for the benefit of others. Trusts separate different aspects of property ownership between:
- Ownership in title (the trust itself);
- Right to manage and control (the trustee); and
- Right to benefit (beneficiaries).
As a result, trusts can help individuals and families protect and manage assets.
What Is a Grantor?
Grantors have several roles when it comes to trusts. They can:
- Create the trust through a trust document or trust instrument,
- Establish the rules that govern trust management,
- Fund the trust by transferring property into it,
- Selects one or more trustees, and
- Name one or more beneficiaries.
Grantors get their name because they grant assets to the trust. However, you may also see the words “settlor” or “trustor” used to refer to the trust’s creator.
Who Else Is Involved in the Trust?
The grantor selects a trustee to manage the trust. That person or entity administers the trust according to terms set by the grantor. Trustees have a “fiduciary duty” toward the trust and its beneficiaries, meaning they must act in their best interests.
Additionally, the grantor chooses one or more beneficiaries. These people or entities benefit from the trust, typically by receiving payments or having a right to the assets after certain events, like the grantor dying.
What Terms Can Grantors Include?
Grantors establish the terms under which trusts operate. Those terms may include:
- At what age or life stage the beneficiaries begin to receive property;
- Restrictions on how funds may be used, such as requiring use for support, education, or health expenses;
- Provisions for successor beneficiaries if the first-named beneficiary cannot inherit;
- Rules about whether the trustee must invest assets conservatively or aggressively; or
- Instructions for family-owned businesses, such as who may vote or manage operations after the grantor’s death.
The grantor can tailor the trust to meet their needs, protect vulnerable loved ones, encourage responsible use of assets, and more. Not every option works for every type of trust, so careful drafting matters.
Revocability and the Grantor’s Rights
One crucial element distinguishing between types of trusts is whether they are revocable or irrevocable. Revocable and irrevocable trusts offer different advantages and disadvantages, especially regarding grantor control and asset protection. This core trust distinction specifically applies to a grantor’s powers.
Revocable Trusts
The grantor can change or undo a revocable trust during their lifetime. Grantors of revocable trusts can often:
- Amend the trust terms,
- Remove or add property,
- Change beneficiaries, or
- Dissolve the trust entirely.
Revocable trusts can save families time and expense, especially when property spans multiple counties or states. They also allow for private management of assets if the grantor becomes incapacitated.
Irrevocable Trusts
An irrevocable trust usually prevents the grantor from changing or revoking it once created. If carefully structured, these trusts can provide benefits like protecting assets from creditors, assisting with Medicaid long-term care planning, and reducing estate taxes.
Once a grantor funds an irrevocable trust, they usually give up rights such as:
- Altering the trust terms,
- Controlling the trust assets, and
- Dissolving the trust.
In Texas, families sometimes use irrevocable trusts to protect ranch property or family land, or to provide long-term support for relatives with special needs.
What Is a Grantor Trust?
A grantor trust is one where the grantor retains a particular degree of control over the property within the trust. Since the grantor retains control, grantor trusts are typically revocable, not irrevocable.
Because they retain control, the assets and the trust’s earnings belong to the grantor for tax purposes. This means that while some trusts report taxes on their own separate tax returns, the grantor reports the trust’s income as their own in grantor trusts.
Trust Planning in Texas
Trusts are a powerful tool for estate planning and asset protection. The attorneys at Massingill can help you understand your options when it comes to trusts, including how one might benefit you and your family. We guide you through trust creation with clear explanations, online access to your documents, and flat-fee pricing.
Contact Massingill today if you are ready to create a trust or want to learn more about trusts.
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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