In estate planning, there are many terms that you may not have heard before. Or there are terms that have a different meaning in the estate planning context. We hope this series of blogs will help demystify estate planning terminology. This blog focusses on trusts in California. We will focus on basic trust terminology and will not go into the more complicated aspects of the numerous types of trusts.
Trust: An entity that is created to hold assets for the benefit of certain persons or entities, with a trustee managing the trust.
Declaration of Trust/Trust Instrument: The document signed by the settlor which establishes the trust and spells out the terms and conditions upon which the trust will be managed or administered.
Settlor/Trustor/Grantor/Donor: The person or entity who sets up the trust.
Trustee: The person who holds the assets of the trust for the benefit of the beneficiaries and who administers the trust and distributes trust property according to the terms of the trust.
Cotrustee: A trustee of a trust when there is more than one trustee acting.
Revocable Trust/Living Trust/Inter Vivos Trust: A trust created and comes into being during the settlor’s lifetime and the settlor can revoke or change the provisions. (A trust is revocable by the settlor unless expressly made irrevocable by the trust instrument.)
Irrevocable Trust: A trust which cannot be changed at any time.
Testamentary Trust: A trust which is created by the terms of a will to manage assets given to beneficiaries.
Issue: A person’s direct bloodline, i.e., children and grandchildren.
Heir: A person who acquires property upon the death of another based on California intestate statutes, i.e., the rules of descent and distribution when someone dies without a will.
Beneficiary: A person or entity who is to receive assets or income from the trust.
Remainder Beneficiary: A person whose interest in the trust assets or income remains after another beneficiary’s interest ends.
Incapacity: When someone is unable to manage their own affairs due to illness, accident, advanced age, under the age of majority, etc. Incapacity can be defined in the trust or can be based on legal incapacity.
Amendment: Changing or altering a trust by adding, subtracting, or substituting trust terms.
Revocation: Cancellation of the trust. A trust is revocable unless it provides otherwise.
Funding the Trust: The process of the trust obtaining legal title to your property by transferring title to you as trustee.
Personal Property/Tangible Property: All property owned by a person or entity that is not land, real estate, growing plants, or improvements to land or real estate.
Separate Property: Property owned by one spouse which was acquired prior to marriage, by gift or inheritance, and property that can be traced back to separate property assets (such as a house purchased by one spouse’s inheritance).
Community Property: Property owned jointly and equally by both spouses. Property and income received by spouses during marriage, such as wages from employment, are community property. Inheritances and specific gifts to one spouse are some exceptions to Community Property.
This is a very basic list of trust terminology. If you have questions about trust terminology or interpretation of your own trust, you should contact the Chilina Law Firm or consult another California attorney who practices in the areas of estate planning for more information.
Authored by Karen Chilina and Co-Authored by Greg Chilina
Chilina Law Firm, a Professional Corporation, is a full-service estate planning, probate, trust administration, business law, and real property law firm that provides a wide-range of advising, transactional, and litigation services to its clients from its office located in Atascadero, California. The firm’s attorneys represent individuals and business entities in an assortment of transactional and litigation matters involving estate planning (including trusts, wills, powers of attorney, and medical directives), probate, trust administration, as well as general business law, contracts, corporate governance, land use, and real property. Chilina Law can be contacted by telephone at (805) 538-5038 or by email at info@chilinalaw.com or visit the Chilina Law Firm at www.chilinalaw.com. Chilina Law Firm is based in Atascadero, California and serves North San Luis Obispo County communities, including Santa Margarita, Atascadero, Templeton, Paso Robles, and San Miguel.
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