Many legal terms are confusing, including some that are used in estate planning. The word "settlor" is used in association with trusts, but some Pennsylvania residents may not be aware of what it means.
A settlor is the person who sets up a trust and then funds it. In some cases, that may be all they do. In many cases, however, a settlor may wear multiple hats, fulfilling several different roles. This is especially true with revocable trusts. The settlor may serve as the trustee who is responsible for making distributions. Settlors may also be the main or sole beneficiaries of their trusts while they are living.
The role of a settlor of an irrevocable trust may be substantially different. Irrevocable trusts, unlike revocable ones, cannot be terminated by the settlor. Their terms also cannot be changed in most cases. Most irrevocable trusts are set up to benefit someone else. The trustee may still give added weight to suggestions the settlor makes regarding the handling of the assets, but that is not required. Instead, the trustee will follow the mandates of the trust document itself.
People who are interested in establishing trusts may want to get advice from an estate planning attorney who can explain the different possible types of trusts that can be used to accomplish a client's purposes. Legal counsel may also suggest other types of estate planning documents and tools that might be appropriate for clients such as durable powers of attorney, health care directives and wills. Trusts do not go through probate, making them attractive to many people who want their families to be able to avoid that lengthy and public process.