KembaraXtra - Legal Terms - Settlor

A settlor is a person who creates a settlement or trust by transferring property to trustees to be held for the benefit of one or more beneficiaries. The settlor determines the terms of the trust, identifies the beneficiaries, specifies the trustees’ powers and duties, and defines how the trust property is to be managed and distributed. The settlor’s intentions form the legal foundation of the trust.

A settlor may establish a trust during his or her lifetime (inter vivos trust) or by will, in which case the trust comes into effect upon death. In its broadest sense, the term includes a testator who creates testamentary trusts through a will. In its narrower and more common usage, however, the term refers to a person who settles property while alive.

The property transferred by the settlor becomes the trust property or settled property. Once validly transferred, legal ownership passes to the trustees, while beneficial ownership belongs to the beneficiaries according to the terms of the settlement. Depending upon the nature of the trust, the settlor may retain no interest at all or may reserve certain powers or benefits, although retaining excessive control can have important tax and legal consequences.

The settlor must possess legal capacity to create the trust and must clearly intend to establish it. In addition, the trust must satisfy the three certainties of trust law: certainty of intention, certainty of subject matter, and certainty of objects. Failure to satisfy these requirements may render the trust invalid.

The role of the settlor is central to the law of trusts and equity. Through the settlement, the settlor determines the legal framework governing the trust property, while trustees assume responsibility for administering it according to the settlor’s expressed intentions and the general law of trusts.