Paralegal Advanced Competency Exam (PACE) Practice Exam

Who is referred to as a grantor in legal terms?

1. The individual managing the trust

2. The person who creates the trust

3. The beneficiary of the trust

4. A legal entity overseeing the trust

The correct answer is: The person who creates the trust

In legal terms, a grantor is the individual who creates the trust. This person transfers assets into the trust and outlines the terms under which those assets will be managed and distributed. The grantor plays a crucial role in defining the purpose of the trust and instructing how it is to be administered. Understanding this role is important because it establishes the foundational document of the trust—the trust agreement. The grantor's decisions dictate the trust's structure, including the powers granted to trustees and the rights of beneficiaries. This is distinct from the roles played by others involved with the trust. For instance, the individual managing the trust, often referred to as the trustee, has different responsibilities focused on administering the trust according to the grantor's directives. Similarly, the beneficiaries are those who will receive benefits or distributions from the trust, and a legal entity overseeing the trust might be involved in managing compliance or governance but does not create the trust itself.