Can a Trust Grantor Really Be a Trustee? – Avoid This Mistake + FAQs

Can the same person be both grantor and trustee? Yes, absolutely—this arrangement is legally permissible and routinely used in estate planning.

The Restatement (Third) of Trusts and the Uniform Trust Code (UTC) both acknowledge that the creator of a trust can also serve as its trustee. In practical terms, a person can declare themselves as trustee over assets they own, effectively creating a trust where they are initially in charge of those assets.

The key requirement is that there must be at least one beneficiary who is not the same person as the sole trustee; otherwise, the trust would merge (since one person can’t be the sole owner of both legal and equitable interests in the property).

In most living trust arrangements, this condition is satisfied because even if the grantor is the sole trustee and sole current beneficiary, there are usually contingent beneficiaries (such as children or other heirs who will benefit after the grantor’s death).

Those contingent interests keep the trust valid and prevent the “merger” of title. For example, John Doe can create the John Doe Revocable Trust, name himself as trustee, and name his children as the beneficiaries to inherit after he dies.

During John’s lifetime, he is effectively in control of the trust assets as trustee (and is also the person who benefits from them as long as the trust is revocable and for his benefit). Upon his death, the successor trustee he named will take over management and distribute assets to the children per the trust terms.

Why Might a Grantor Want to Also Be Trustee?

Having the same person serve as both grantor and trustee can be beneficial for several reasons:

• Control: The grantor retains direct control over how the trust assets are managed. This can be important for someone who wants to continue handling their investments or ensure their property is used in a certain way.
• Convenience: It simplifies administration. The grantor-trustee doesn’t have to communicate their wishes to an outside trustee—they already know how they want the trust run. There is no need to convince or instruct someone else to make certain transactions or distributions.
• Privacy and Continuity: Especially with revocable living trusts, having the grantor also serve as trustee allows a seamless transition of asset management if the grantor becomes incapacitated. A successor trustee can step in easily. Additionally, because revocable trusts avoid probate, the arrangement keeps details about the estate out of public probate records upon death.
• Tax Neutrality: When the grantor is also the trustee (and beneficiary) of a revocable trust, there’s no change in taxation or how assets are treated—for income tax purposes, it’s as if the trust doesn’t exist separate from the individual. The grantor uses their own Social Security number for the trust and reports all income on their personal tax return. This makes annual tax filing straightforward.

However, along with these benefits come certain caveats and risks—especially when we move beyond revocable trusts into the realm of irrevocable trusts and asset protection. Next, we will examine how the grantor-trustee arrangement plays out differently in revocable vs. irrevocable trusts, followed by federal tax considerations and state-specific law nuances.

Revocable Trusts: Grantor and Trustee as the Same Person (The Norm)

A revocable living trust is the most common context in which a trust grantor also serves as trustee. In fact, this is typically the default setup in estate planning: the person creating the trust (grantor) names themselves as the initial trustee. They also usually name themselves as the primary beneficiary during their lifetime.

How it works: Because the trust is revocable, the grantor retains the right to change any terms of the trust or terminate it entirely at any time. The grantor-trustee can buy, sell, invest, or spend trust assets freely (subject only to the modest restriction that they manage assets responsibly if there are other beneficiaries who might receive something later). In practice, while the grantor is alive and competent, they can treat the trust assets just like their own property — because legally and for tax purposes, it still is their property.

Some key points for revocable trusts where grantor = trustee:

• Fiduciary duty: Even though a grantor-trustee is effectively managing their own assets, they technically have a fiduciary responsibility to the trust beneficiaries. In a revocable trust, the beneficiaries during the grantor’s life are often just the grantor themselves (and perhaps their spouse). Future beneficiaries (like children who inherit later) have no enforceable rights while the trust remains revocable. In many jurisdictions (under the UTC, for example), the trustee of a revocable trust owes duties exclusively to the grantor while the grantor is alive. This means there is essentially no conflict because the person to whom the duty is owed (the grantor) is the same person managing the assets.

• Taxation: All income and capital gains generated by a revocable trust are reported on the grantor’s personal income tax return. The IRS disregards the separate entity for tax purposes under the grantor trust rules. (Specifically, Internal Revenue Code §676 says if a trust is revocable, the grantor is treated as the owner for tax purposes.) There is no separate tax ID needed in many cases while the grantor is alive; the trust can use the grantor’s SSN.

• Creditor treatment: Because the trust is revocable and the grantor can take back the assets at any time, creditors of the grantor can generally reach into the trust just as if the assets were still in the grantor’s name. The trust does not provide asset protection against the grantor’s debts or liabilities. For example, if John Doe had a revocable trust and he gets sued, a judgment creditor can go after the assets in the revocable trust. Similarly, for Medicaid or other government benefit purposes, revocable trust assets are typically counted as the grantor’s own resources.

• Estate inclusion: Upon the grantor’s death, the assets in a revocable trust are included in the grantor’s gross estate for federal estate tax purposes (assuming the estate is large enough to be taxable). Because the grantor had the power to revoke the trust up until death (a power to control the disposition of the assets), the IRS includes those assets under Internal Revenue Code §2038 (retained right to revoke or amend) or §2036. The key here is that revocable trusts are not used to save estate taxes; they are used for probate avoidance and management ease. If the estate’s value is under the federal exemption (which is over $12 million per individual in the mid-2020s), estate tax inclusion may not matter. But for very large estates, other techniques are used to actually remove assets from the taxable estate.

In summary, for revocable trusts, having the grantor also be the trustee is standard and poses no legal issues. The grantor retains full control, and the law treats the arrangement as though the person still personally owns the assets (despite the formal trust structure). The real challenges and interesting nuances come up when we consider irrevocable trusts.

Irrevocable Trusts: Can the Grantor Stay in Control as Trustee?

Irrevocable trusts are a different story. By definition, an irrevocable trust is one that the grantor cannot unilaterally revoke or amend after it is created (except in limited ways, if at all). Irrevocable trusts are often used for purposes like estate tax reduction, asset protection, charitable giving, or long-term gifts to family that the giver wants managed in trust form. Once assets are placed in an irrevocable trust, the grantor is usually giving up some degree of ownership and control over those assets — that’s often the point (for example, to remove the assets from the grantor’s estate for tax or liability reasons).

So, what if the grantor wants to also serve as trustee of an irrevocable trust they create? The answer is nuanced: it is legally allowed in many situations, but it can undermine some of the very reasons people create an irrevocable trust. Let’s break it down by scenario:

• Grantor as trustee, but not a beneficiary: Suppose you create an irrevocable trust for the benefit of your children (and you do not retain any right to get the assets back or benefit from them). You want to be the trustee just to manage how the money is invested and distributed to the kids. This is generally permissible. You can name yourself as trustee in the trust document and still keep the trust irrevocable and for others’ benefit. However, caution is needed – if as trustee you have very broad discretionary powers (like the power to decide if and when to distribute income or principal to the beneficiaries), the IRS might say you effectively retained too much control over the trust. This can have two major implications:

  1. Income Tax – Grantor Trust Status: Under the grantor trust rules of the Internal Revenue Code (sections 671-679), if the grantor retains certain powers or interests in an otherwise irrevocable trust, the trust’s income will still be taxable to the grantor. For instance, IRC §674 says that if the grantor can control beneficial enjoyment of trust assets (directly or as trustee), the trust becomes a “grantor trust” for income tax. This means even though you gave the assets to the trust, you’d still pay the tax on any income the trust investments generate, as if you still owned them. In some cases, this is intended (some trusts are deliberately set up as “intentionally defective grantor trusts” to leverage tax benefits), but if your goal was to shift tax burdens or truly separate yourself, being trustee with broad powers might thwart that.

  2. Estate Tax – Inclusion in Estate: The bigger concern historically is that if a grantor keeps too much control, the assets might be pulled back into their estate when they die, defeating the purpose of estate tax planning. Under IRC §2036, if you transfer assets to a trust but retain the right to “possession or enjoyment” of the property or the right to designate who will enjoy it, then those assets will be included in your gross estate. Similarly, §2038 can include trust assets if at death you held a power to change the enjoyment of the property. If you are the trustee of an irrevocable trust for your kids and have full discretion to distribute (or not distribute) the trust property among them, some would argue you hold a power to determine who benefits and when — essentially a form of control that could be seen as a retained right. There are ways to limit this risk, such as:

     • Limiting the trustee’s discretion by an ascertainable standard (e.g., distributions can only be made for the beneficiaries’ health, education, maintenance, or support – often abbreviated as HEMS). If the grantor-trustee can only distribute to others based on a strict standard, not whim, the IRS might be more likely to respect that the grantor did not retain a general power to benefit themselves or alter distributions freely.

     • Requiring an independent co-trustee or distribution trustee for certain decisions. Some irrevocable trusts allow the grantor to serve as a trustee for administrative purposes (investing assets, keeping records) but require a co-trustee or trust advisor to approve any distributions of principal or changes benefiting the beneficiaries. This can prevent the grantor from having unilateral say over who gets what and when, thus avoiding the argument that the grantor retained the power to control beneficial enjoyment.

  In short, if you as grantor want to be trustee of a truly irrevocable trust for others, careful drafting is essential to avoid negative tax outcomes. Many estate planners historically would advise against a grantor being the sole trustee of an irrevocable trust meant to be outside the estate. Instead, they might name someone else or a corporate trustee, precisely to make a clean break. On the other hand, if estate tax inclusion isn’t a concern (for example, if your estate is well below the taxable threshold), the downside of estate inclusion disappears for you. Indeed, since the federal estate tax exemption is quite high (nearly $14 million per person in 2025), a large majority of people aren’t worried about estate tax. For them, the main consequence of being a grantor-trustee might just be paying income taxes on trust income (which they might not mind), in exchange for keeping control.

• Grantor as trustee and also a beneficiary (self-settled trust): Now consider a scenario where you create an irrevocable trust, but you also name yourself as one of the beneficiaries (or the trust is for your benefit in some way). This is known as a self-settled trust – you set it up with your own money, and you’re intending to potentially benefit from it. Can you also be the trustee in this case? Legally, you can write the trust document to appoint yourself as trustee, but this is where state law and asset protection concerns loom large. Under the traditional common law (followed by many states and the Uniform Trust Code), if a trust is self-settled, the grantor’s creditors can reach the trust assets at least up to the maximum amount that the trustee could distribute to the grantor. In other words, you can’t typically shield your own money from your creditors by putting it in a trust for yourself, even if it has spendthrift provisions. If you are the trustee and can decide to distribute money to yourself, a court can simply order you to pay your creditors from those trust funds.

  • Asset Protection Trust States: A minority of U.S. states have statutes that do allow self-settled asset protection trusts (often called Domestic Asset Protection Trusts, or DAPTs). These include states like Delaware, Nevada, Alaska, South Dakota, Tennessee, and a few others. In those states, if certain conditions are met, creditors of the grantor might be barred from accessing the trust assets, even if the grantor is a discretionary beneficiary. Typically, those laws require that the trust have an independent trustee located in that state, and often the grantor can’t have unfettered control. For example, the grantor might retain the right to distributions as determined by another trustee or a distribution advisor. Some DAPT statutes do permit the grantor to be a co-trustee or to have certain powers, but usually not sole control. If you attempt a self-settled trust in a non-DAPT state (for instance, California or New York), and you also serve as trustee, you should assume it will not protect the assets from your creditors at all. It’s essentially ineffective for asset protection — the law will treat it as if you never parted with the assets.

  • Medicaid and Government Benefits: Self-settled trusts often do not help with Medicaid eligibility if you remain a beneficiary, regardless of whether you are trustee. Medicaid rules and many state laws consider such trusts as available resources for the applicant. There are specific Medicaid trust strategies (like irrevocable income-only trusts) where the grantor might not be trustee (often they name a child as trustee to avoid any ability to distribute principal to the grantor).

  • Fiduciary issues: If you are both the grantor, a beneficiary, and the trustee, you will be in the position of managing trust property for yourself and possibly for other beneficiaries. This is a classic conflict of interest scenario, which the law doesn’t outright forbid but scrutinizes. As trustee, you must act impartially and cannot favor your own interests over those of other beneficiaries. If, say, the trust says it can pay income to you and to your siblings, and you are the trustee, you have to be fair in deciding distributions — you can’t simply funnel all the benefits to yourself. In practice, to avoid this sticky situation, trust drafters will either not name the grantor as a beneficiary at all (if the goal is asset protection or tax removal), or if they do (as in some DAPT or special situations), they often will not name the grantor as the sole trustee. They might allow the grantor to have some role (like an investment trustee) while someone independent serves as distribution trustee to approve any payments that could go to the grantor/beneficiary.

In essence, for irrevocable trusts, having the grantor serve as trustee is possible but must be approached carefully. If the grantor has no beneficial interest (the trust is purely for others), being trustee is mostly a question of avoiding too much control that triggers tax problems. If the grantor is also a beneficiary, state law may deny any asset protection, and an independent trustee is usually recommended to avoid conflicts and make the trust effective. Many estate attorneys will weigh the pros and cons with their clients — is it more important to have the original owner maintain control as trustee, or to achieve certain tax/asset protection outcomes which might require giving up the trustee position to someone else?

Quick Comparison: Revocable vs. Irrevocable Trusts (Grantor as Trustee)

To highlight the differences between these scenarios, here is a comparison:

Tax Implications: Navigating IRS Grantor Trust Rules

When discussing a grantor serving as trustee, we must delve into the grantor trust rules under the Internal Revenue Code. These rules (found in IRC §§ 671-679) determine whether a trust’s income is taxable to the trust itself, or to the grantor of the trust. The term “grantor trust” in tax law refers to any trust where the grantor (or another person) is treated as the owner of the trust assets for income tax purposes. The question of who is trustee is relevant because if the trustee has certain powers and that trustee is the grantor, it can activate these rules.

Key tax points:

• Revocable = Grantor Trust: As mentioned, if a trust is revocable by the grantor, it’s automatically a grantor trust for income tax. The IRS doesn’t consider it a separate taxable entity during the grantor’s life. All income, deductions, and credits flow through to the grantor’s 1040 return.

• Certain Powers = Grantor Trust: With irrevocable trusts, the IRS has a list of powers that, if retained by the grantor, will make the trust a grantor trust (i.e., income taxed to the grantor). Examples include:

  • The power to change the beneficiaries or redistribute trust property (IRC §674 covers power to control beneficial enjoyment).
  • The power to deal with trust assets for less than full consideration or to borrow from the trust without adequate interest or security (IRC §675).
  • The right to have trust income pay for life insurance on the life of the grantor or grantor’s spouse (IRC §677).
  • A reversionary interest in the trust (grantor gets the property back after some time) that exceeds 5% of the trust value (IRC §673).

  If the grantor is the trustee, some of these powers may automatically apply unless restricted. For example, if as trustee you could distribute income to your spouse or kids however you like, §674 would generally kick in. There are exceptions and nuances—such as if distributions are limited by an ascertainable standard, or if certain powers can only be exercised with approval of an adverse party (a beneficiary who isn’t friendly to the grantor’s interests).

• Intentionally Defective Grantor Trust (IDGT): Estate planners sometimes purposefully draft an irrevocable trust to be a grantor trust for income tax but not counted in the estate for estate tax. This setup lets the grantor pay income taxes on trust earnings (which is effectively an additional gift to the trust beneficiaries, as the trust can grow without being depleted by taxes), while the trust assets pass to heirs outside the estate. In such cases, the grantor often is not the trustee; instead, they include a special power (like the power to swap assets with the trust or loan money without interest) that triggers grantor trust status without giving the grantor a controlling management role. The grantor typically relinquishes rights that would cause estate inclusion but keeps a hook for income tax. This shows that sometimes a grantor not being the trustee is part of the plan to carefully control tax outcomes.

• Trustee Compensation and Taxes: If a grantor does serve as trustee and the trust is not a grantor trust for some reason (rare scenario, since grantor-trustee usually triggers grantor trust status unless narrowly limited), the grantor-trustee could even be entitled to trustee fees for their services. Those fees would be taxable income to them, but the trust could deduct them as expenses. However, in most cases, a grantor-trustee of their own trust wouldn’t take a fee, as they’re managing their own assets (or if revocable, it’s all disregarded anyway).

• Gift Tax: Naming oneself as trustee doesn’t by itself trigger gift tax—gift tax is about transferring assets. If you put assets into an irrevocable trust for others, you may have made a gift. If you retain certain powers or an interest (like the ability to get the assets back, or income for life), the gift might be incomplete for gift tax purposes (meaning the assets are still in your estate later). Serving as trustee and retaining discretion could be viewed as retaining a sort of interest or power. It’s another reason careful drafting or legal advice is needed; substantial retained control could mean you haven’t actually completed the gift, undermining the estate tax planning.

• Income Tax Reporting: In a situation where an irrevocable trust is a grantor trust (due to the grantor-trustee or other retained powers), the trust may either not need a separate tax return at all (the grantor just reports everything), or it may file an information return that indicates all income is reported by the grantor. The IRS has procedures (like filing a Form 1041 with a statement) for grantor trusts. The main point is, being a grantor-trustee typically simplifies tax filings only in the revocable trust scenario. In other cases, coordination is needed to ensure income is properly reported by the right party.

In sum, from the IRS perspective, having the grantor be the trustee often results in the trust being invisible for tax purposes (a grantor trust). This isn’t inherently bad — it just means no tax differentiation between personal assets and trust assets. But if your intention was to have the trust taxed separately or to shift income to beneficiaries in lower brackets, a grantor-trustee setup won’t achieve that.

State Law Nuances: How Local Laws Affect Grantor-Trustee Arrangements

Trust law in the United States is largely a matter of state law, and while there are broad common principles, specific rules can vary from state to state. Here are some important state-specific and jurisdictional nuances that impact whether a grantor can or should serve as trustee:

• Spendthrift and Self-Settled Trust Rules: As mentioned earlier, most states follow the traditional rule that if you create a trust for your own benefit (self-settled trust), your creditors can reach the trust assets. This is true no matter who the trustee is — even if you named someone else as trustee, if they can potentially give you money from the trust, your creditors can get to it. If you are the trustee as well, it becomes even easier for creditors (since you effectively control distributions). A few states, however, have broken from this rule via legislation. These Domestic Asset Protection Trust (DAPT) states allow you to set up an irrevocable trust, name yourself as a beneficiary (usually a discretionary beneficiary), and after a certain time period, your creditors cannot touch the assets, provided the trust was not a fraudulent conveyance. Each of these states imposes its own conditions. For example:

  • Delaware: Allows self-settled spendthrift trusts. Typically requires at least one trustee to be a Delaware resident or trust company, and certain affidavits about solvency must be signed. The grantor can retain some powers (like vetoing distributions or limited testamentary powers of appointment) and even be an investment advisor for the trust, but generally an independent trustee handles distributions.
  • Nevada: Often cited for strong asset protection trust laws, with no state income tax. Grantor can be a co-trustee but must not be the sole decision-maker for distributions to themselves.
  • Alaska, South Dakota, Tennessee, Wyoming, etc.: These states have variations of DAPT statutes as well, with different nuances on how much control the grantor can keep. For instance, some states allow the grantor to have a lifetime or testamentary limited power of appointment (change beneficiaries) without exposing the trust to creditors. Others require that the grantor not act as sole trustee.
  • If you live in a state like California (which does not allow self-settled asset protection trusts), simply creating a DAPT in another state might not protect you if California law and courts have jurisdiction. There have been cases where courts didn’t uphold the asset protection of an out-of-state trust when the debtor was from a non-DAPT state — it’s an evolving area of law. So, if asset protection is the goal and you’re thinking of being grantor and trustee, you must navigate both the law of the trust’s state and your own state’s laws.

• Community Property States: If a married couple in a community property state (like California, Texas, Arizona, etc.) sets up a trust, sometimes both spouses together are considered the grantors of a joint trust. They might co-serve as trustees. Community property adds complexity to who is considered the owner of what. Often revocable living trusts for married folks in these states are joint trusts where both spouses are grantors and trustees. This usually doesn’t cause issues while revocable, but if they ever make it irrevocable, each spouse’s retained powers might need examining. Additionally, community property law could affect the trust if one spouse is trustee and the other isn’t—fiduciary duties might still require a spouse-trustee to manage assets for the community’s benefit.

• State Income Tax: Some states tax trust income differently, and the presence of the grantor as a trustee (or as a resident of that state) can make the trust a resident trust for state tax purposes. For example, New York has a “throwback tax” on accumulated income of certain trusts, and California tends to tax trusts based on trustee and beneficiary residence factors. If a trust is a grantor trust for federal purposes, typically the individual is just taxed on their home state return as well; but if it’s not a grantor trust, the trust itself might be subject to state income tax depending on the trustee’s location. Being a trustee in your home state could inadvertently subject an otherwise out-of-state trust to your state’s income tax. Wealthy grantors sometimes purposely choose an out-of-state trustee in a no-tax state to avoid state income tax on trust earnings.

• Uniform Trust Code (UTC) Adoption: The UTC has been adopted in many states (in whole or in part). Under UTC §603, when a trust is revocable, the rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor (grantor). This reinforces that for revocable trusts, having the grantor as trustee is fine because no one else has a say until the grantor dies or becomes incapacitated. The UTC also includes the rule in §505 that a creditor of a settlor can reach the assets of a revocable trust, or the maximum that can be distributed to a settlor of an irrevocable trust. States that adopted the UTC generally follow that principle unless they’ve modified it.

• Case Law – Precedents: Court decisions in various states and federal courts have shaped the understanding of grantor-trustee situations:

  • In some court cases, being the trustee did not by itself make the trust assets reachable by creditors, unless the trust was self-settled or the trustee had retained beneficial rights. For example, courts have noted (as in Markham v. Fay and other cases) that what matters is whether the grantor retained benefits, not just the title of trustee. If the grantor was trustee but could not benefit from the trust, then the trust assets were generally protected from the grantor’s creditors.
  • On the flip side, if a grantor tried to use a trust to hide assets but effectively still treated them as their own, courts will not be fooled by the form. There have been cases of abusive trust schemes where individuals create trusts, name themselves trustees (and often beneficiaries indirectly), and try to assert the trust is separate from them for tax or creditor purposes. The IRS and courts often invoke economic substance over form: if you are trustee, beneficiary, and essentially using the money as you please, the law will treat it as your money.
  • A famous doctrinal point is the fiduciary duty aspect: even if you are the grantor and trustee, when managing trust assets you must abide by trust law duties. Cases and restatements emphasize that a trustee (even if it’s the settlor) cannot just do whatever they want if that violates their obligations to other beneficiaries or the trust purpose. Self-dealing (using trust assets for personal transactions that aren’t allowed) is prohibited. For example, if as trustee you “loan” yourself money from the trust on unfair terms, or you invest the trust solely in a way that benefits you elsewhere, that can be a breach of duty.
  • Some state courts have applied merger doctrine if someone tries to make a trust where they are the sole trustee and sole beneficiary. Remember: a trust needs a separation of legal and equitable title. If at any time the trust has only one person in both roles, the trust can collapse. For instance, if you create an irrevocable trust naming yourself as the only beneficiary and you are trustee, you have just given yourself your own assets in trust form – a court can say there’s no trust at all (you just own the assets outright). Always ensure there’s at least one other beneficiary (even if contingent or charitable) in an irrevocable trust if you’re going to be the trustee, to avoid this issue.

• Professional Trustees vs. Individual (Grantor) Trustees: Some states have regulations or preferences regarding who can serve as trustee, especially for certain types of trusts. For example, large perpetual dynasty trusts or charitable trusts might require a corporate trustee for reliability and oversight. If a grantor sets up such a trust, they might not be allowed by law or practicality to serve as the trustee for long (especially after transferring assets to charity, etc.). Additionally, if the trust is governed by a state that the grantor doesn’t reside in (for tax or asset protection reasons), often a local trustee is needed to establish situs in that state. This means the grantor might have to give up the trustee role to someone in that jurisdiction.

Bottom line: Always consider the specific state law context when deciding to be your own trustee. What is perfectly fine in one scenario (e.g., you manage your own revocable trust in any state) might be problematic in another (managing an irrevocable trust for your own benefit in a state that doesn’t allow that kind of asset protection). Estate planning attorneys will often structure trusts differently depending on the state—perhaps using an LLC or other entities to work around certain restrictions, or splitting roles between trustees and trust protectors.

Wearing Both Hats: Pros and Cons of Being Grantor and Trustee

To summarize the discussion from a practical standpoint, let’s outline the major advantages and disadvantages of a grantor serving as trustee of their trust:

Advantages:

• Maintained Control: You don’t have to hand over the reins to someone else. You decide how assets are invested and when to distribute them (within the trust’s allowances). This is often psychologically important; many people are more comfortable knowing they’re still overseeing the wealth they created.

• Simplicity in Management: There’s no need to communicate your financial decisions or needs to an outside trustee. If you want to rebalance the portfolio or sell a property, you just do it. If you need funds (and the trust allows distribution to you), you don’t have to request it formally from another person.

• Lower Administrative Costs: If you serve as your own trustee, you typically won’t charge yourself a trustee fee, and you won’t hire a professional trustee who might charge annual fees based on a percentage of assets. This can save money, especially for smaller trusts that can’t justify corporate trustee fees.

• Privacy and Family Control: Keeping the trustee role in the family (with yourself or close relatives) avoids involving third-party institutions in your personal matters. Some families value the privacy of not having bank trustees or trust companies in their business. Also, a family member trustee might be more understanding of the beneficiaries’ needs and the grantor’s intent.

• Tax Planning Flexibility: If done intentionally, being the grantor-trustee of an irrevocable trust allows you to purposely choose grantor trust status for income tax without involving an outsider. You can then pay taxes on trust income (which effectively lets the trust grow faster for your beneficiaries because the trust itself isn’t depleting assets to pay tax). Paying those taxes can be seen as an additional gift that doesn’t count against gift-tax exemption, all while you keep control.

Disadvantages:

• Tax Inefficiencies If Unintended: If not planned properly, you might end up paying income tax on trust income you didn’t actually need or use, simply because you kept too much control. And for high net worth individuals, having trust assets included in your estate (because you were trustee and retained powers) could trigger estate taxes that a properly structured trust might have avoided.

• No Asset Protection (in many cases): By staying as trustee, especially if you also have beneficial access, you likely forfeit the chance that the trust could shield assets from lawsuits or creditors. Plaintiffs can argue you never really gave up the asset or that you can instantly distribute assets to yourself to satisfy a judgment.

• Fiduciary Responsibility and Liability: Serving as a trustee is a legal responsibility. If things go wrong—say the trust investments tank or a beneficiary accuses you of mismanagement—you could be held personally liable for breaches of trust. Corporate trustees carry insurance and have professional experience; an individual grantor-trustee might unknowingly fail to perform some duty (like providing accountings to remainder beneficiaries in an irrevocable trust, or diversifying investments prudently) and get into legal trouble. Also, if you commingle trust assets with personal assets or otherwise ignore formalities, it can cause legal complications.

• Difficulty in Upholding Impartiality: If there are multiple beneficiaries (like your children), and you as grantor are one of them or have your own interests (like a desire to favor one child over another or use trust assets in a certain way), being the trustee puts you in a position where you’re supposed to be impartial. This could cause family tension or even grounds for beneficiaries to challenge your decisions. In contrast, a neutral trustee can act as the “bad guy” in enforcing trust limits, whereas if you’re the trustee, every decision is personal.

• Administrative Burdens: Acting as trustee means you have paperwork and formal duties—filing trust tax returns (if not a grantor trust), keeping records, perhaps obtaining a bond (some trusts or courts require a bond for individual trustees to insure against mismanagement unless waived), and adhering to legal standards. Some grantors may not want to deal with these headaches in their later years or may lack the expertise to manage complex trusts, which is why they might choose a professional trustee instead.

It really comes down to a trade-off between control vs. protection/formality. Many people start as trustees of their revocable trusts without issue. The question becomes trickier with irrevocable trusts: some decide to relinquish the trustee role to ensure the trust functions as intended (for tax or protection), while others keep the role to maintain control, accepting the trade-offs.

Grantor as Trustee in Action: Real Examples and Court Precedents

Let’s look at a few simplified examples to cement how this works in practice:

• Example 1: Revocable Living Trust (California) – Maria sets up a revocable living trust in California. She is the grantor, the sole trustee, and the sole beneficiary during her life. She transfers her house and investment account to the trust. Maria continues living in the house and managing her investments exactly as before. Legally, nothing significant changes except that her assets are now under the trust’s name (e.g., “Maria as Trustee of the Maria Trust”). Maria files taxes as usual (no separate return for the trust). Years later, Maria passes away; the trust becomes irrevocable at her death, and her son (whom she named as successor trustee) takes over. The son distributes the assets to himself and his siblings as the trust instructs, without a probate court involved. In this common scenario, Maria being both grantor and trustee caused no problems at all. It was expected and part of the design.

• Example 2: Irrevocable Trust for Children, Grantor as Trustee – James wants to set aside $500,000 in an irrevocable trust for his two children, ages 20 and 25, to help them in the future and maybe skip some of that from his estate if he lives long. He doesn’t plan to get any of this money back or benefit from it himself. However, James isn’t entirely comfortable handing over control to someone else right now. He names himself as trustee, with the power to invest the assets and distribute income or principal to the kids as needed for their welfare (health, education, maintenance, support). Because he limited distributions by the “HEMS” standard, he is somewhat constrained in how he can give money to the kids — he can’t arbitrarily give one child a sports car, for instance, unless it’s arguably for their need and within the trust purpose. The trust is written to be irrevocable and for the children only; James cannot revoke it or use the money for himself. This setup means:

  • The $500,000 and any growth is out of James’s probate estate and could be outside his taxable estate (assuming no retained strings beyond being trustee).
  • The trust is likely still treated as a grantor trust for income tax because James as trustee can decide to distribute or accumulate income (even with standards, the conservative approach is to assume grantor trust treatment unless an independent party has to consent to distributions).
  • James will pay the taxes on any trust income each year. If that becomes burdensome, the trust could include a provision permitting the trustee to use trust funds to pay any income taxes attributable to trust income (some irrevocable trusts include this to help the grantor).
  • If James is sued personally, the trust assets should not be available to his creditors since James has no right to that money for himself. Creditors can’t compel a distribution to James because the trust disallows it. However, a very aggressive creditor might argue James’s control as trustee is effectively a right—though legally they shouldn’t succeed if the trust is properly drafted. After James’s death, the remaining trust funds will continue for the kids or distribute to them, as per the trust terms.
  • James must remember that as trustee, he owes fiduciary duties to his children as beneficiaries. If he fails to invest wisely or treats one unfairly, they could have legal recourse. It’s usually fine since as a loving parent he intends to act in their best interest, but it’s a legal point to note.

• Example 3: Self-Settled Asset Protection Trust (Nevada) – Linda lives in Arizona (which has no DAPT law) but decides to establish an asset protection trust in Nevada to guard some of her wealth from potential future liabilities. She sets up the Linda Irrevocable Trust in Nevada, names a Nevada trust company as a co-trustee and herself as an investment co-trustee. Linda is also a permissible beneficiary of this trust (the trust says the trustee may distribute income or principal to Linda for her needs, but it is fully discretionary). She transfers $2 million into the trust.

  • Because Nevada law allows it, after two years (the state’s seasoning period for fraudulent transfer concerns), the trust assets are generally protected from any creditors of Linda that arise after the trust was created. If someone sues Linda in Arizona and wins, they face difficulty reaching into the Nevada trust due to Nevada’s law. However, it’s not 100% bulletproof, especially if an Arizona court claims jurisdiction or if the cause of action existed before funding the trust.
  • Linda as a co-trustee can direct how the funds are invested, which satisfies her desire for control. But the Nevada trust company must approve any distributions to Linda herself, to avoid Linda essentially giving herself the money. This split control is crucial; Linda can’t just write herself a check from the trust at a whim.
  • For tax purposes, this trust is likely a grantor trust because Linda retained beneficial enjoyment (the potential to receive distributions) and maybe a power as a trustee. So Linda pays taxes on the trust income. No estate tax benefit is gained here because if Linda still has access to the trust during life, it will likely be in her estate (and if she gave it up completely to avoid estate tax, she also wouldn’t be a beneficiary; asset protection trusts typically sacrifice estate tax benefits).
  • The trust company ensures compliance with Nevada law and provides an extra layer of independent judgment. Linda’s case illustrates that the grantor can serve in some trustee capacity (investment management) while sharing responsibilities to make the arrangement work legally. If Linda tried to do it all herself (sole trustee and beneficiary in a non-DAPT state), the trust would fail to protect anything.

• Example 4: Life Insurance Trust (ILIT) with Grantor as Trustee – Raj creates an irrevocable life insurance trust to hold a life insurance policy on his own life. The trust is designed so that when he dies, the insurance payout will go to the trust and then to his family, without being included in his estate (a common estate planning use of ILITs). Raj wonders if he can be the trustee of this ILIT during his lifetime to keep control over the policy. Typically, estate planners advise against the insured being the trustee of their own life insurance trust. Why? If Raj is trustee, he might be seen as retaining incidents of ownership over the policy (like the ability to change beneficiaries or access the cash value), which could pull the insurance proceeds into his estate at death – defeating the purpose. Instead, ILITs usually name someone else (a spouse, adult child, or trusted friend/bank) as trustee. This way, Raj gives up control of the policy to the trust, and the IRS then excludes it from his estate. This example is a cautionary tale: in some trust arrangements aimed at estate tax exclusion, being your own trustee is not advisable. The professional advice would be: Raj should not serve as trustee of a trust that owns insurance on his life, to ensure the tax benefits hold.

These examples demonstrate the spectrum of possibilities. The grantor-as-trustee setup works great for basic revocable trusts, can be managed carefully for some irrevocable trusts, and is discouraged or disallowed in other specialized trusts (like ILITs or some charitable trusts). Always analyze the type of trust and goals involved.

Frequently Asked Questions (FAQ)

Q: Can the grantor and trustee be the same person in a family trust?
Yes. In most family trusts (especially revocable living trusts), the person who creates the trust often names themselves as trustee. This is a common practice to maintain control.

Q: Does a grantor serving as trustee affect the trust’s taxes?
Often it does. If the grantor is trustee and retains control, the trust is usually treated as a grantor trust for tax purposes. All trust income would be taxed to the grantor.

Q: Are assets in a trust safe from lawsuits if the grantor is the trustee?
Generally, no. If the trust is revocable or lets the grantor benefit, creditors can reach the assets. Only an irrevocable trust with no benefit reserved for the grantor might shield assets.

Q: What are the risks of being both grantor and trustee of an irrevocable trust?
Risks include defeating the trust’s purpose: the assets could end up back in your taxable estate, you might lose asset protection, or you could face liability for mismanagement. Careful drafting is required to avoid such pitfalls.

Q: Can a married couple be grantors and trustees of the same trust?
Yes. Married couples often establish a joint revocable trust as co-grantors and co-trustees. If one spouse dies or becomes incapacitated, the other can usually continue as sole trustee.

Q: Is there any trust where the grantor cannot be the trustee?
Usually the grantor can be trustee, but some trusts discourage it. For example, charitable remainder trusts and life insurance trusts usually use an independent trustee to preserve tax benefits.

Q: Does naming myself as trustee make my trust invalid or a sham?
No. It’s legal to name yourself as trustee. You must still honor the trust’s terms and act as a fiduciary. Courts only intervene if someone abuses the trust form to defraud or evade the law.

Q: How do I know if my trust is a grantor trust or not?
Most revocable trusts are grantor trusts (the grantor pays the tax). If you retained powers or benefits in an irrevocable trust, it’s likely still grantor. Only if you surrendered all control and benefit would it become a non-grantor trust.

Q: If I move to another state, can I still be the trustee of my trust?
Yes. You can remain trustee if you move. However, different states have different trust laws and tax rules, so it’s wise to review your trust with an attorney after moving.

Q: What does “settlor reserved powers” mean in trust context?
It means any power you kept when creating the trust, such as the ability to revoke or modify it later. Such reserved powers often keep the trust tied to you for tax or estate purposes.

Q: If the grantor is trustee, how are successor trustees chosen or used?
In the trust document, the grantor names successor trustees to step in if they can’t serve. The trust can also specify how to appoint a new trustee if needed.

Q: Do I need a lawyer to set up a trust where I’m the trustee, or can I do it myself?
You can create your own trust and name yourself trustee, but it’s best to use a lawyer. Trust and tax laws are complex, and a lawyer ensures the trust is set up correctly without mistakes.