Are you considering establishing a trust to protect your assets and have peace of mind? If so, you may be wondering about some of the terminologies of estate planning.
There are a lot of terms you may need to familiarize yourself with when it comes to trusts. We recognize that most people don’t read law dictionaries in their spare time, and terminology can get confusing regarding trusts. It is helpful to ensure you grasp the terminology before you begin the process with your lawyer. Here’s a brief overview of trust settlors, their responsibilities, and some other roles included in a trust.
What are the Settlor, Trustee, and Beneficiary of a Living Trust?
Settlor
A settlor is a person who creates a trust for their assets. Legally, a settlor must be at least 18 years old and have the mental capacity to establish a trust document. They can also be known as a testator or a donor.
Trustee
The settlor can name themselves or another person as the trustee of the trust. The trustee is the person in charge of managing the trust and distributing assets to the beneficiaries after the settlor’s death. This is done according to the instructions outlined in the trust document.
The settlor may name themselves the trustee to continue making changes to their revocable living trust, also known as an inter-vivos trust, while they are still alive. They will also need to name successor trustees in the event of their death, and may decide to name more than one person as a co-trustees.
Beneficiary
The beneficiary of the trust is a person who receives assets from a trust or will. The settlor may also be a beneficiary. However, they must also name other beneficiaries to inherit their assets upon their passing.
The Different Roles in a Living Trust
Here is an example scenario to help you understand the settlor, trustee, and beneficiary as they apply to a trust. For this scenario, the settlor is establishing a revocable living trust. This is one of the most common types of trust documents.
Jane has decided to establish a revocable living trust to protect her assets while she is living. It will also allow her estate to avoid going to probate court upon her passing. She is acting as the settlor to create the trust and has decided to name herself as a trustee so that she can manage her assets in the trust.
She has decided to name her daughter, Susan, as her successor trustee to administer the trust should Jane pass away. As her daughter, Susan will also be a beneficiary along with Jake, Jane’s son and Susan’s brother. Upon Jane’s passing, Susan and Jake will inherit her assets according to her wishes outlined in her estate plan. This may include real estate, personal property, life insurance, etc.
As Jane establishes her trust, there are some important factors to keep in mind:
4 Things for Settlors to Keep in Mind When Creating a Trust
- Your Wishes: Include detailed instructions in the trust document regarding how you would like your trustee to manage and distribute your assets to your designated beneficiaries. You can list items that have sentimental value to you and to whom they should be given.
- Update Your Trust: Remember to update your trust as life change happens and transfer any new assets, such as real property, to the trust. Any assets not in the trust will have to go to probate upon your passing.
- Plan for Trust Administration: Make sure to compile an outline of your personal and financial affairs to make it easier for the person serving as trustee to manage and distribute your assets. Consider keeping paperwork with all this information in one place, and be sure to update it as time passes.
- Estate Taxes: Consider making gifts to your beneficiaries or charitable organizations. This is a way to help your heirs avoid some of the estate tax that will apply when inheriting your assets and personal property upon your passing. It is a proactive action to take while you are still operating as the trustee of your trust.
The Legacy Lawyers: Legal Advice You Can Depend On
The Legacy Lawyers are here to answer your questions and give you peace of mind by assisting you with your estate planning. We can help you establish your trust for the benefit of your loved ones and to protect your assets. Schedule a consultation with us by calling (800) 840-1998.
