Settlors are persons who choose to settle or grant property to a trust for the benefit of one or more beneficiaries. Generally, the structure of the trust is established as an express trust, meaning that the purpose for the trust is very well defined and specific. A settlor may also be referred to as a donor, trustor, or grantor.
A settlor may choose to establish the trust in several different ways. For example, a parent who wished to donate or settle certain financial assets into a trust intended to assist children with college expenses could create an express trust for this purpose. For as long as the trust remained functional, the assets placed in the trust could only be used for college related costs, such as tuition, fees, books, and housing. The settlor would retain the right to reassume control of the assets in the trust once the children had completed college, or chosen to drop out.
During the life of the trust, the settlor may or may not also function as the trustee for the trust. More often, the settlor remains as the trustor or donator of the assets and appoints a third party to function as the trustee. When this is the case, the trustor or settlor normally provides the trustee with authorization to administer the funds in the trust or trusts in a manner that is in accordance with the stated purpose of the trust.
While the laws governing the establishment of trusts vary somewhat around the world, there are typically three factors that must be present into order to ensure the trust is functioning within the limits of local law. First, the settlor must formally announce the intention to establish the trust. Next, the property or assets that are to be included in the trust must be clearly identified. Last, the recipients or beneficiaries of the trust must be clearly named, and eligibility requirements for receiving benefits from the trust have to be defined.