FIVE LIVING TRUST TERMS TO KNOW
The living trust has many terms which it is helpful to understand, but some are more important than others. In this article, I will discuss five (5) trust terms to know and explain why a living trust lawyer St. Charles like me can ease your understanding.
#1 TRUSTEE
A trustee is the person in charge of administering a living trust. Generally speaking, what a trustee can and cannot do when administering a trust is governed by the trust document itself. In some cases, Missouri law can control.
The main job of the trustee is to administer the assets of the trust and to communicate fairly and openly with the beneficiaries of the trust. The trust document itself will spell out what powers a trustee has, but there are several main powers that can be found in almost all trusts.
First, a trustee has the power to decide how to deal with property. Should a home be sold or kept? The trustee usually gets to decide that. How should trust assets be invested? All of the decisions are up to the trustee because they are a fiduciary, who must protect trust assets and make fair decisions with respect to trust property.
Second, trustee’s have duties. For example, in most cases the trustee must account for spending of the trust. The trustee must keep the beneficiaries, who will receive trust assets, apprised of what the trust owns and decisions they make involving trust assets.
Finally, a trustee must distribute trust funds to beneficiaries pursuant to the terms of the trust. If the trust requires that assets be distributed right away, they must make efforts to make that happen. If the trust requires the trustee to hold on to trust assets indefinitely for a beneficiary, the trustee must also do that.
#2 TRUSTOR
The trustor (or sometimes called a Grantor or a Settlor) is the person creating the revocable living trust. In many cases, the trustor and the trustee is the same person, such as when a parent creates a trust where they name their children as beneficiaries. Usually in such a case, the parent trustor retains the power to amend the trust. They can spend trust funds however they wish.
Trustors often retain powers such as the right to amend their trust, to name new trustees and beneficiaries and to appoint someone as a trust protector.
#3 BENEFICIARY
A beneficiary is a person who is entitled to receive trust assets pursuant to the terms of a trust. A current beneficiary is someone who may receive trust assets now. A contingent beneficiary is a person who would trust assets upon the happening of some event or occurrence. For example, if Mom and Dad create a trust and make their son a 100% beneficiary, per stirpes, the children of the son (Mom and Dad’s grandchildren) would inherit if the son predeceases. They are contingent beneficiaries.
#4 TRUST ESTATE
A trust estate refers to assets in a trust upon the death of a trustor. Simply stated, the trust estate is what it is to be distributed. Not every asset that a person owns is always owned by their trust. For example, say Mary creates a living trust and puts all of her assets in the trust because she wants to name all three of her kids as beneficiaries of the trust estate. However, she decides she wants to give her car to her youngest child because they don’t have one. Then Mary dies. The trust estate would be all the assets in the trust. But the car would not be part of the trust estate. That would transfer to the youngest daughter via a transfer on death designation, presuming she survives her mother Mary upon Mary’s passing.
#5 PROBATE
Probate is the process by which a court administers the assets of a person who has passed away. A trust is designed primarily to avoid probate and its delays, costs and complications. Probate can be avoided easily with a trust as long as all the assets of the decedent are owned by their living trust when they pass away. Probate can still be avoided by doing what are called non-probate transfers for assets not owned by the trust. A good example would be the car left by Mary in the above example. That car would not be owned by the trust but would still avoid probate through the transfer on death designation.
CONCLUSION
Trusts get a bad reputation sometimes for being overly complicated. However, like anything else, trusts can be understood by breaking down the complex into easily understood concepts. As a trust attorney St. Charles, I consider that a primary component of the job I do for our estate planning St. Charles clients.
