Glossary of Probate and Estate Planning Terms
Estate Planning is much easier to digest if you have a solid understanding of the terminology. Understanding the terms Trustor, Settlor, Grantor, Trustee and Beneficiary will allow you to better comprehend your estate plan.
With that said, different estate planning attorneys may use synonyms for the names of the different people within an estate plan. This can make reviewing a simple estate plan feel more complicated that it is. By becoming familiar with these terms and their synonyms, you will be ahead of the curve when creating or reviewing an estate plan.
Below is a summary of some key estate planning terms.
Common Estate Planning Terms #1: Trustor
What is the Definition of a Trustor?
The Trustor (also known as a “Settlor” or a “Grantor”, depending on the attorney’s preference) is the person who creates the Trust (i.e. the person who owns assets, like a home, and wishes to transfer those assets to a Trust). The Trustee is the person in charge of managing and investing Trust assets and making distributions (if the terms of the Trust require it) to the Trust’s beneficiaries.
The term Trustor is synonymous with Settlor and Grantor.
Common Estate Planning Terms #2: Grantor
What is the Definition of a Grantor?
A Grantor of a Trust is another way of saying Trustor. Simply put, it is the person who creates a trust, and puts trust assets into their trust, for the benefit of another person.
The term Grantor is synonymous with Settlor and Trustor.
Common Estate Planning Terms #3: Trustee
What is the Definition of a Trustee?
A Trustee is a an individual (or corporate fiduciary) who is specifically named in a Trust document to carry out the instructions of the Trust. The Trustee is tasked with collecting all of the assets in the Trust Estate and manage them until the Trust instructs them to distribute them to a beneficiary. The Trustee can also manage the Trust Property full time and pay the beneficiary income from the property. The specific instructions for a Trustee should be clearly drafted in a trust by a qualified estate planning attorney.
While a trustee can administer a trust without the help of an attorney, there are strict laws that should be followed. Thus, many Trustee’s choose to hire a Trust Administration attorney to make sure that they follow the trust instructions correctly, and do not take on any personal liability.
Common Estate Planning Terms #4: What is a Beneficiary?
Except for estates that are exempt from probate, the beneficiary of a Will only receives their inheritance after the will is examined and approved by a probate judge.
Beneficiaries of trusts, life insurance, and other financial accounts with beneficiary designations, will receive their benefit based on the terms of the legal document in which they are named.
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Glossary of Probate and Estate Planning Terms
Beneficiary: The person named in the Will to inherit the assets of an estate or a trust.
Custodian of the Will: The person who has the Will when the testator (see below) dies.
CLT: Charitable Lead Trust.
CRT: Charitable Remainder Trust.
Decedent (or deceased): The person who died.
Decedent’s estate: All the property (real or personal) that a person owned at the time of death.
Executor: A person named in a Will and appointed by the Court to carry out the Decedent’s wishes.
FLP: Family Limited Partnership
GPOA: General power of appointment.
GRAT: Grantor Retained Annuity Trust
GSTT: Generation-Skipping Transfer Tax
Heir: A person who inherits when there is no Will.
Intestate: When someone dies without leaving a Will.
Intestate succession: The order of who inherits property when someone dies without a Will.
IRA: Individual Retirement Account
ILIT: Irrevocable Life Insurance Trust
Last Will and Testament: Another name for a Will (See below).
Legatees or devisees: People who are named in a Will.
Personal property: Assets like cash, stocks, jewelry, clothing, furniture, or cars.
Personal representative (or administrator or executor): The person appointed by the court to pay creditors, taxes, and distribute the remaining assets to the beneficiaries or heirs.
Pour-Over Will: A Will that lists a Trust as its beneficiary.
POA: Stands for “Power of Attorney”. Can refer to either a health care power of attorney or a financial power of attorney.
Probate: The process of deciding where, how, and to whom to distribute the decedent’s property when there is a Will.
Probate Administration: The process of deciding where, how, and to whom to distribute the decedent’s property through the probate court.
Real property: Land and real estate.
Summary Probate or Summary Proceedings: An expedited process of administering a decedent’s estate without going through the formal probate process. Only available in certain circumstances.
Testate: When someone dies leaving a Will.
Testator: The person who signs the will.
Trust: When one person (trustee) holds property at another person’s (settlor’s) request for the benefit of someone else (the beneficiary).
Will: A legal document that lists a person’s wishes about what will happen to his/her property after death.
How do the Trust, Grantor, Trustee and Beneficiary all work together?
By analogy, think of a Trust as a small, single shareholder corporation. In this imperfect analogy, the Grantor is the sole shareholder of the corporation and the Trustee is the President of the Corporation.
Like this corporation, where all assets owned by the corporation are indirectly owned by the sole shareholder, all assets owned by the Trust are indirectly owned by the Grantor.
Similarly, like in a corporation, where all day-to-day decisions of the corporation are made by the President, who has the legal authority to manage, invest, sell, and encumber (to name only a few) corporate assets, the Trustee of the Trust is the person who has these powers with respect to Trust assets.