In talking with clients, it is sometimes apparent that there is misunderstanding regarding the titles and roles involved in the cast of a living trust. This article is an attempt to shed some light on the matter.
The person creating a trust can be called by several different names. Grantor, trustor, and settlor are three terms commonly used to refer to the creator of the trust. The creator may be either an individual (a single or married person) or a married couple.
The second person in the cast is the trustee. The trustee is the person who manages the property in the trust according to the guidelines of the trust. When a trust is created, the creator of the trust usually appoints himself or herself as the initial trustee and assumes authority over the assets of the trust. Where the trust is created by a married couple, each spouse is a trustee and together they are referred to as co-trustees.
If one of the spouses in a joint trust becomes incapacitated, generally his or her spouse will carry on as sole trustee. In an individual trust, if the initial trustee is unable to carry out the duty of managing the trust and its assets, the person named in the trust as the successor trustee will assume the role of trustee. The successor trustee essentially steps into the shoes of the initial trustee and continues to manage the trust and its assets according to the terms of the trust.
The third cast member is the beneﬁciary. There may be only one beneficiary or there may be several. Most beneﬁciaries are designated by name; however, some are designated by a class of people, such as “all my children” or “all my nieces and nephews”. The beneficiary might also be a charity or other type of organization. It is possible for the successor trustee to be a beneﬁciary as well.
Beneﬁciaries can be of two general types: beneﬁciaries of a speciﬁc gift or residuary beneﬁciaries. For example, suppose the grantor has a beautiful baby grand piano that he wants to go to his grandchild that shows special musical talent. The grantor can specify in the trust that the piano will go to that grandchild. He can then designate that everything else (after payment of debts, funeral expenses, taxes and any costs of administering the trust) will be equally divided between his children. The children are the residuary beneﬁciaries – they take the “residue” of the estate left over after speciﬁc gifts are given and expenses are paid.
When a trust is created, the person creating the trust generally has all three roles: grantor (or trustor or settlor), initial trustee and initial beneficiary. If a grantor becomes incapacitated and unable to manage the trust, the successor trustee will manage the trust for the grantor’s benefit. The other named beneficiaries only have a contingent interest in the trust until the death of the grantor. Only after the death of the grantor does the interest of any of the named beneﬁciaries become vested. The successor trustee then manages the trust for the benefit of the beneﬁciaries.
Most trusts are written so that the grantor reserves the right to amend the trust to change his or her choice of successor trustees and/or beneﬁciaries. This means that the cast is not set in stone and cast members are subject to change; however, the role of successor trustee or beneﬁciary always remains the same.
© 2018 by Marlene S. Cooper. All rights reserved.
(Marlene S. Cooper, a graduate of UCLA, has been an attorney for over 35 years. Her practice is focused entirely on estate planning, estate administration and probate. You may obtain further information at www.marlenecooperlaw. com, by e-mail at Marlene@ MarleneCooperLaw.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).