A legal document created by you, the “Testator,” that sets forth your wishes regarding distribution of your assets and guardianship of any minor children. While a living trust takes effect as soon as it is executed, a will does not take effect until the death of the Testator. A will may be rescinded at any time before the Testator’s death and may be amended by codicil at any time before the Testator’s death. The Testator selects a “Personal Representative” to oversee the estate after the Testator’s death. A will must go through the Probate Court, at which time the estate is distributed among Beneficiaries. Wills are made public, whereas the terms of living trusts remain private.
A legal document created to hold assets during your lifetime such as your home, bank accounts, stocks and personal property. You, the “Trustor,” act as the “Trustee” and “Beneficiary”- meaning you have complete legal control over the assets in the trust (the “Trust Estate”) and the assets are used for your own benefit. Upon your death, the “Successor Trustee” will distribute the Trust Estate to your chosen Beneficiaries according to your terms. A revocable trust may be amended or revoked at any time during the Trustor’s lifetime. The terms of a living trust remain private and will save your Beneficiaries the time and cost associated with probate- as well as plan for property, income and estate taxes.
Trustor (a.k.a. Settlor or Grantor)
The person executing the trust. If a married couple is placing community property into trust, they are each a Trustor. The Trustors select the Trustees, Successor Trustees, and Beneficiaries, as well as the manner in which the Trust Estate will be distributed.
The bank accounts, property, life insurance policies and retirement plans the Trustor elects to leave to his or her Beneficiaries.
Trustee / Successor Trustee
The person, persons, or entities with the authority to manage the Trust Estate and distribute it for the benefit of the Beneficiaries. If there are two or more Trustee’s they are called “Co-Trustees”. When the first spouse passes away, the surviving spouse becomes the sole Trustee.
The person or persons selected by the Trustor to inherit the Trust Estate. A Beneficiary may be a person, business entity, charity or even a beloved pet.
A legal document often accompanying a living trust. Like a basic will, a pour over will goes into effect upon the death of the Testator. It states that any property in the estate will be transferred to the trust upon the death of the Testator. It “pours over” assets that were not included in the living trust into the Trust Estate.
When a court orders someone who is not the natural parent of a minor child to be his or her guardian. A guardian of the person provides for the care of a minor until age 18 and has the same power and responsibility of a legal parent. A guardian of the estate provides for management and distribution of money and property left to the child. Rather than allowing a court to determine who should be the legal guardian of your child, you may nominate a guardian and successor guardians in your will.
Power of Attorney (a.k.a. POA)
A legal document in which you, the “Grantor,” appoint an “Agent” with the authority to act on your behalf in financial matters. An Agent’s authority under a POA may begin immediately or upon the happening of a particular event or a particular date. A typical POA becomes ineffective upon the death or incapacitation of the Grantor.
Durable Power of Attorney
A POA giving your Agent the authority to act on your behalf in financial matters if you become incapacitated. A Grantor may be deemed “incapacitated”- that is unable to manage his or her own affairs- upon the written statement of a treating physician or upon the written agreement of multiple named relatives or friends of the Grantor.
Medical Directive (a.k.a. Living Will or Advance Health Care Directive)
A legal document similar in nature to a Durable Power of Attorney, but regarding health care and medical matters. This document informs the Agent what specific medical decisions will be made on behalf of the Grantor should he or she become incapacitated. Once executed, your medical directive should be discussed with, and a copy given to, both your Agent and your physician.
A reference to a Probate Court, a branch of state court focused on handling the distribution of an estate passed by will (“Testate”) or the estate of a person who passed away without a will or estate plan (“Intestate”). As mentioned above, a probated will is made public and can be a costly and time-consuming process. A living trust does not go through the probate court. Probate courts also oversee conservatorships, will contests, guardianships and elder law cases.