The Difference Between a Grantor & a Beneficiary

By Vanessa Padgalskas

Grantor is the legal term for a person who creates a trust, and beneficiaries are people named by the grantor to benefit from the trust by receiving the trust's property. The legal terms "grantor," "settlor," and "creator" have the same meaning and can be used interchangeably. A grantor and beneficiary have different roles in a trust, but either may serve as trustee of the trust. Although the grantor establishes a trust and may have the authority to change it, beneficiaries also have authority to amend or revoke the trust and take legal action to protect the trust in certain circumstances.

Transferring Property to a Trust

A grantor transfers property, which includes money and assets, to a trust for the benefit of the trust's beneficiaries. The trustee will distribute property to the beneficiaries in accordance with the terms of the trust, as written by the grantor. A trust can have one beneficiary or multiple beneficiaries. A trust can also have more than one grantor, such as two spouses who create a family trust.

Who Can Be a Beneficiary

A beneficiary can be a person, pet or charity. Some grantors, often those with a large estate, want to pass their money to a charitable cause. Setting up a trust is a way for the grantor to plan for the future, whether it be planning for his family members, loved pet or charitable cause close to his heart that will benefit from the trust as a beneficiary. Additionally, an irrevocable charitable trust may enjoy tax advantages by reducing the grantor's taxable estate by the amount transferred to the trust.

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Managing the Trust

The grantor must appoint a trustee to manage the trust, which may include filing tax returns for the trust. The grantor can appoint himself as trustee of a revocable trust for the duration of his lifetime, but must appoint a successor trustee to take his place should he die or become incapable of performing his duties as trustee. The grantor can appoint one of the beneficiaries to be the trustee. However, the grantor cannot be the trustee of an irrevocable trust. The terms of the trust instruct the trustee on what duties to perform and how to distribute property to the beneficiaries.

Beneficiary Rights

A trust's beneficiaries have certain rights they can invoke to monitor the trust and trustee. Although the grantor, not the beneficiaries, appoints the initial trustee, the beneficiaries can petition the court to remove the current trustee for acting outside the purpose of the trust or sue the trustee for not acting in the beneficiaries' best interest. In addition, if the purpose of the trust has already been achieved or is impossible to achieve, the beneficiaries can petition the court to terminate the trust. Beneficiaries must act unanimously when asking a court to terminate a trust. Beneficiaries have more authority to change an irrevocable trust, in which the grantor relinquishes the trust property, in comparison to a revocable trust, in which the grantor retains authority over the trust property. A revocable trust can be changed or canceled by the grantor, whereas an irrevocable trust cannot be changed or cancelled by the grantor without consent from the beneficiaries.

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