Legal Definitions - Settlor

A Settlor is the individual or entity who creates a trust. This person initiates the trust, decides its purpose, and transfers assets into it. Essentially, the Settlor is the architect of the trust, determining its rules, who will manage the assets (the trustee), and who will ultimately benefit from them (the beneficiaries). The Settlor's instructions are documented in a legal agreement called the trust instrument.

Here are a few examples to illustrate the role of a Settlor:

• Example 1: Funding a Grandchild's Education

  Eleanor, a retired teacher, wants to ensure her granddaughter, Lily, has funds for college without giving her a large sum of money directly. Eleanor decides to create a trust. She drafts a trust document specifying that a certain amount of money from her savings will be held and managed by a bank (the trustee) and used solely for Lily's educational expenses when she turns 18. In this scenario, Eleanor is the Settlor because she created the trust, provided the assets, and dictated the terms for how those assets should be used for Lily's benefit.

• Example 2: Establishing a Charitable Foundation

  Dr. Aris Thorne, a successful entrepreneur, is passionate about environmental conservation. He decides to establish a perpetual charitable trust dedicated to funding research into sustainable energy solutions. Dr. Thorne transfers a significant portion of his company shares and real estate into this new trust, appointing a board of directors to serve as trustees and manage the investments, with all proceeds directed towards approved research grants. Dr. Thorne is the Settlor because he conceived and established the charitable trust, contributed the initial assets, and defined its mission and operational guidelines.

• Example 3: Creating a Trust for Personal Asset Management

  Maria, a busy professional, wants to simplify the management of her investment portfolio and ensure her assets are handled according to her wishes even if she becomes incapacitated. She creates a revocable living trust, transferring her brokerage accounts and a rental property into it. Maria names herself as both the initial trustee and the primary beneficiary during her lifetime, with her sister designated as a successor trustee if Maria can no longer manage her affairs. Maria is the Settlor because she established the trust, funded it with her own assets, and outlined the terms for its management and distribution, even though she also serves in other roles within the trust.