In estate planning and decedent estate practice, there are many terms that you may not have heard before. Or there are terms that have a different meaning in the estate planning and decedent estate context. We hope this series of blogs will help demystify estate planning and decedent estate terminology. This blog focusses on administration of trusts in California. We will focus on basic trust administration terminology and will not go into the more complicated aspects of long-term trusts, the numerous types of trusts, or complicated aspects of trust taxation and litigation.
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/Trust Agreement: The document signed by the settlor which establishes the trust and spells out the terms and conditions upon which the trust, and its assets, will be managed or administered.
Settlor/Trustor/Grantor/Donor: The person or persons who create the trust and add property to the trust. There can be, and often is, more than one settlor of a 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. Often, upon first creating a revocable living trust, the settlor is also the trustee and the beneficiary until the settlor’s death.
Cotrustee: A trustee of a trust when there is more than one trustee acting.
Successor Trustee: The person (or financial institution) who takes over management of the trust after the previous trustee dies (usually the settlor), resigns, or becomes unable to continue management of the trust assets.
Deceased Settlor: A deceased person who, at the time of his or her death, held the power to revoke the trust in whole or in part.
Revocable Trust: A trust which can be changed at any time by the settlor/trustee.
Irrevocable Trust: A trust which cannot be changed at any time. Usually a revocable trust becomes irrevocable upon the death of the settlor.
Trust administration: The process that occurs after the death of either or both settlors of the trust. The trustee manages the trust property and administers it according to the trust’s terms and for the benefit of the beneficiaries. Trust administration is not a court supervised process and the ultimate goal is to transfer the deceased person’s property to the people who are named as beneficiaries in the trust.
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. Sort of a second-in-line beneficiary.
Heir: A person who, based on California law, would take the decedent’s property if he or she died without a will or a trust.
Issue: A term used to describe a person’s direct bloodline, i.e., children (including adopted children) and grandchildren.
Authored by Karen Chilina and Co-Authored by Greg Chilina
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