Trust Terms You Need to Know

  

  

  

During your estate planning process, it will be helpful to know a few of the terms related to a trust. Understanding these common terms will help you feel more confident as you plan.

Trust Terminology Glossary

Beneficiary: The person(s) or entity(ies) named by the Grantor in the trust document to benefits from trust assets.

Co-Trustee: A joint Trustee, sharing responsibilities.

Discretionary Distributions: A distribution from a trust is discretionary if the Trustee is permitted to decide how and when to make distributions while following the guidance in the trust document.

Estate: The aggregate of all property and interests in property owned by an individual.

Estate Tax: A state and/or federal tax levied on an estate (aggregate of all property and interests in property owned by an individual at death) whose value exceeds a certain dollar amount.

Executor: A party designated by the Grantor in a will to administer an estate upon the death of the Grantor.

Fiduciary: A person or organization that acts in good faith and in the best interest of another person.

Gift Tax: A tax on the transfer of property from one person to another while receiving nothing in return, or less than full value, in return.

Grantor: A Grantor, also known as a “Settlor”, is the person who established the trust.  

Guardian: Party appointed by a court to be legally responsible for a person who is unable to care for themselves. The person for whom a guardian is appointed is called a “ward.”   A ward can be a minor child or an adult who is incapacitated.    

Irrevocable Trust: A trust that once created, cannot be modified, amended or revoked by the Grantor without permission of each Beneficiary or by court order. The trust creator permanently gives up control of the assets in the irrevocable trust.

Mandatory Distributions: A distribution is mandatory if the Trustee is required to make distributions to beneficiaries for a specific purpose as outlined by the Grantor in the trust document.

Pourover Will: A will which directs certain assets be transferred (poured over) into a trust after the death of the person who created the will.

Principal: The assets owned by the trust.

Remainder Beneficiary: The person or entity that receives what remains of the Grantor’s assets after the Primary Beneficiary. Remainder Beneficiaries are second in line, after the Primary Beneficiary.  

Revocable Trust: A trust that can be changed or terminated at any time by the Grantor.

Specific Bequest: The gift of an item or asset to a specific person or entity.

Spendthrift Clause: A clause that protects a beneficiary’s interest in a trust by prohibiting the beneficiary from selling, giving away, pledging or otherwise transferring their interest in the trust. It prevents beneficiary’s creditors from reaching the beneficiary's interest or trust distribution before its receipt by the beneficiary.

Trust: A trust is a relationship in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another. A legal document is created which dictates guidelines for distributions and defines how assets should be managed during the trust creator’s lifetime and after their death.

Trust Administrator: The Trust Administrator is the person at a financial institution assigned to manage the trust account.

Trustee: The Trustee is the party designated in a trust document who has oversight of the trust and is responsible for trust assets.

Trusts are an important planning tool that is unique to every individual. Our trust services department is here to assist you through the process and identify solutions that align with your needs.