Can the grantor also be the trustee of their own trust?

Yes, the grantor can usually be the trustee, but it creates significant tax and protection consequences. Whether to do so depends on your goals.

Self-trusteeship of revocable trust:

This is common and uncontroversial. A revocable living trust often has the grantor as initial trustee, with a successor trustee named for after the grantor's death or incapacity. Used for:

• Probate avoidance (assets in the trust avoid probate)
• Incapacity planning (successor trustee can act if grantor becomes incapacitated)

No tax advantage (trust is grantor-trust for income tax) and no creditor protection (trust is grantor-owned for creditor purposes).

Self-trusteeship of irrevocable trust:

This is where things get complicated. The IRS and courts use substance over form — if the grantor effectively controls the trust as trustee, the trust may be deemed:

1. Includible in grantor's estate (defeats wealth-transfer goal)
2. Subject to grantor's creditors (defeats asset-protection goal)
3. Grantor trust for income tax (income flows to grantor's personal return)

The "ministerial trustee" exception:

If the grantor's trustee powers are limited to ministerial acts (recordkeeping, asset custody, signing routine documents) — and NOT substantive control over distributions or investment decisions — the trust can remain effective.

But this requires:

• An independent co-trustee or distribution committee with veto power
• Limited grantor power over distributions
• Limited grantor power over investments

Hard to achieve in practice. Most attorneys recommend NOT having the grantor serve as trustee of any irrevocable trust.

Best practices for trustee selection:

Common compromise — co-trustees:

The grantor names themselves as a co-trustee alongside an independent trustee. The grantor handles ministerial acts; the independent trustee handles substantive decisions (distributions, investment policy changes). This preserves trust integrity while keeping the grantor involved.

For tax purposes, the independent trustee must have the unilateral power to make substantive decisions, OR the structure must qualify under specific IRC safe harbors (like the "ascertainable standard" doctrine under §674(b)).

The trustee succession problem:

A trust may last 50-100+ years. Individual trustees die or retire. Corporate trustees may merge or fail. The trust agreement must specify a robust succession plan:

• Primary trustee
• Successor #1, #2, #3
• Mechanism for naming new trustees if all named successors fail
• Mechanism for replacing a problematic trustee (e.g., majority vote of beneficiaries)

For very-long-lived trusts (dynasty trusts), this is critical. Wealth advisors often recommend corporate trustees from large, stable institutions specifically because of multi-generational continuity.

For the exam:

CFA L3 tests this conceptually:

• Revocable trust + grantor as trustee = no problem, no benefit
• Irrevocable trust + grantor as trustee = jeopardizes tax and creditor protection
• Best practice: independent trustee for irrevocable trusts

Watch for vignettes where the grantor mistakenly serves as trustee of an irrevocable trust — the question may be testing whether you spot the problem.