What’s the Difference Between an Executor and a Trustee?

There is a common confusion about the difference between executors and trustees. Though these roles are distinctly different, both are important when it comes to estate planning. Understanding the difference between executor and trustee will be helpful when you think about doing your estate planning.

In the simplest terms, executors are to Wills what trustees are to Trusts. There is more detail required to be completely accurate in their roles and differences, though. 

The Difference Between Wills & Trusts

A Trust may be best understood by describing the roles in a Trust. A Trust requires three roles: a settlor, a trustee, and a beneficiary. The settlor (also known as grantor) is the person who establishes the Trust; a trustee is the person who carries out the instructions of the settlor (which are stated in the Trust); and the beneficiary is the person for whose benefit the Trust is established.

A Trust is a contract involving the person who establishes the trust (settlor), the person who will carry out the terms of the Trust (trustee) and the persons who will be benefited by the Trust (beneficiaries).

When it comes to your estate planning, you can fill all these roles. This means you can be the settlor, trustee and beneficiary of your Trust when you create a Trust, and you will identify other people to take over the role of trustee when you are no longer able and to be the beneficiaries when you are gone. This is called a “living trust” or “revocable trust”.

Like many things, though, there are exceptions.

The most basic forms of Trusts used for estate planning are a living Trust and a testamentary Trust. A living Trust is a Trust that is established during life; and a testamentary Trust is a Trust established after death – created in a Will. Thus, Trusts and Wills can be used in conjunction with each other, and, in fact, they almost always are used in conjunction with each other.

Wills and Trusts are used with each other in two fundamental ways:

1. a Will that creates testamentary Trusts; or
2. a living Trust with a “pourover” Will.

A Will that creates testamentary Trusts provides for the distribution of assets into those Trusts after the estate affairs are wrapped up.

A living Trust is often used in estate planning as the primary means for handling the estate, in place of the Will, and a “pourover” Will is used to direct assets into the Trust after death.

The affairs of an estate that is subject to a Will are handled in the Probate Court. The probate proceeding is the process of informing heirs, other people named in the Will and creditors, providing a platform for claims to be heard, paying all the final expenses and taxes of the decedent (the person who died), selling property (if necessary), collecting all the property into the Probate Estate and, ultimately, distributing the assets that are left over to the people named in the Will. The Executor handles the probate process from start to finish according to the instructions in the Will.

The executor transfers the assets to the trustee at the end of the probate process when a Will directs the assets into testamentary Trusts. Then, in accordance with the instructions in the Trusts, the trustee takes over handling the assets for the benefit of the beneficiaries.

Any property that is in a Trust is handled by the trustee. When a living Trust is created for the purpose of estate planning, the Trust is often intended to be the primary governing document for the estate, not the Will. The “pourover” Will is done to direct assets that were not included in the Trust during life into the Trust on the death. The executor’s role is to get the assets into the Trust; the Trustee handles the assets in the Trust and carries out the terms of the Trust.

It is important to note that this is a very simple explanation of Wills and Trusts and the roles of executors and trustees. Executors carry out the terms of a Will, and trustees carry out the terms of a Trust. Wills are subject to the Probate Act in Illinois; and Trusts are subject to the Trusts and Trustees Act in Illinois. There are many subtleties and intricacies, but the difference between executors and trustees ultimately comes down to the difference between the person who carries out the terms of a Will and the person who carries out the terms of a Trust.

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