Executor vs Trustee: What’s the Difference?
There are several types of trustees:
- Trustees who are appointed in a will to hold title to certain assets on behalf of one or more beneficiaries (testamentary trusts)
- Trustees who are appointed to act as executor (see personal representative) when no executor has been appointed in a will, or when no executors are willing or able to assume the responsibilities of executor
- Trustees who are appointed for specific roles, such as a Trustee in Bankruptcy
Roles of Executor and Trustee
The roles of an executor (personal representative) and a trustee are similar in that they both act for the benefit of the beneficiaries of the estate. However, their roles are different.
An executor, whether appointed in the will or by the courts, oversees the administration of the entire estate with the exception of trusts in the will, such as testamentary trusts. The assets of a trust will be transferred to beneficiaries at a later date than the rest of the estate, or will provide a long-term income stream for certain beneficiaries. The executor’s duties also include the requirement to obtain an accounting of assets by the trustee or trustees.
A person can be both an executor and a trustee of a testamentary trust.
A trustee is only responsible for dealing with specific trusts and has no responsibilities for anything other than those trusts. A trustee is given temporary ownership of certain assets to invest on a beneficiary’s behalf.
Purposes of Trusts
Trusts may be established for various purposes, including:
- To hold title to assets on behalf of beneficiaries, such as minor children, that will be distributed to beneficiaries at a later date.
- To provide a certain amount of income for disabled beneficiaries who may lose their entitlement to government assistance if they own more than a certain amount of assets.
- To provide income for a spouse or other beneficiary who is incapable of managing, or unable to manage, their share of the estate’s assets.
- To hold title to assets that will be distributed to creditors if the estate is insolvent (more debts than assets). In this case, the executor will act as the trustee and negotiate with, and distribute assets to creditors after funeral and estate administration expenses have been paid. If bankruptcy ensues, the executor’s role may be taken over by a Trustee in Bankruptcy.
- To reduce or defer taxes or preserve pension benefits that are payable to the estate.
A Public Trustee may also be appointed by the court to represent a beneficiary who can’t be located. The executor will deal with the Public Trustee in the beneficiary’s place.
Trustees must be served notices when the executor is applying for a Grant of Probate, just as beneficiaries are.