Estate Planning 101: Trust & will terms that everyone needs to know
Quick, what’s the difference between a will and a trust? Might you be a testator? And what do you know about a conservatorship, besides the fact that Britney Spears has been embroiled in drama surrounding one?
While these terms are familiar, many people are often pressed to define exactly what these important estate planning documents are, says Tony J. Tyre of The Law Offices of Tony J. Tyre, Esq., APC. Most people are typically even more unsure if they would benefit by having an estate plan in place and how one works. However, understanding these documents can help ensure your wishes are carried out and the best interests of your loved ones are protected now and the future, he says.
Estate planning terms explained
Tyre offers the following explanations for some important trust and will terminology everyone should understand no matter where they are in the estate planning process.
The Players
- Trustor/settlor/grantor/trustmaker - All of these terms refer to the person who establishes a living trust. There are typically one or two trustors of a trust, depending on whether it’s a single or married couple trust.
- Trustee - A trustee is the person who has the legal authority to manage a trust and the assets held therein. A trust may have one or multiple trustees. Usually, the trustor is the initial trustee of the trust.
- Testator - A person who establishes a will is known as a testator.
- Executor - The executor has the legal authority to manage and administer a will. An executor performs the same functions as a trustee, except for a will. A will can have multiple executors.
- Beneficiary - A beneficiary is the individual or individuals for whose benefit a trust or will is created. In other words, it’s good to be a beneficiary!
Common Documents
There are various estate planning documents. Some of the most common are:
- Will - Perhaps the most well-known estate planning document is a will, which is legal document that sets forth how an individual’s assets are to be devised and distributed upon their death. Wills must be administered through probate court. They’re appropriate in cases where an individual only owns assets that can pass by beneficiary designation.
- Trust - A trust is a legal instrument that allows assets to be passed to designated beneficiaries outside of probate court. We recommend trusts for clients who own real property. A trust may be revocable or irrevocable (more on what that means follows).
- Revocable trust - A revocable trust is the most common type of living trust. It can be amended or revoked during the trustor’s lifetime. The trustor retains control of the assets held in the trust and can freely add or remove property from it. Its primary purpose is to avoid probate.
- Irrevocable trust - An irrevocable trust cannot be amended or revoked once it’s created. Medi-Cal Asset Protections (MAPTs) and Veterans Asset Protection Trusts (VAPTs) are common types of irrevocable trust. In general, though, irrevocable trusts are less common and more expensive and complex than revocable trusts. With these trusts, the primary purpose is to protect assets when receiving government benefits. The trustor isn’t the trustee nor the beneficiary of these irrevocable trust. Rather, the trustor transfers assets into the trust to be managed by a third-party trustee, so the trustor forfeits control of assets. That means they can’t freely add or remove property form the trust..
- Pour-over will - A pour-over will ensures that when someone passes, their remaining assets will pass to an already established trust. This is a companion will to a trust.
Incapacity
Incapacity is a commonly overlooked, but equally important part of estate planning.
- Durable power of attorney This document specifies who you would want to make financial decisions for you should you become incapacitated and what powers that person has.
- Advance healthcare directive - An advance healthcare directive specifies who you would want to make medical decisions for you should you become incapacitated and what powers that person has. For example, do you want to stay on life support? Do you want to donate your organs?
- Conservatorship - A conservatorship is the appointment of a conservator or guardian by a court to care for another adult (the conservatee), who is incapacitated by illness or old age. They may either be established as a conservator of the person, in which that person makes health-care related decisions for the conservatee, or as a conservator of the estate, in which they make financial, property and personal decisions for the conservatee. Establishing a conservatorship is typically a complicated process, involving many court cases. Conservatorships are typically needed when the person does not have a durable power of attorney and advance healthcare directive.
Knowing the language is important when it comes to estate planning, but it’s just the start, Tyre says.
“A proper estate plan is important to understand and have in place no matter where you are in life,” he says. “No one likes to think about their passing, but too often people wait until it’s too late, which can cause heartache and lead to the expensive and time-consuming probate court process. We’re here to help you fully understand your options and choose the best ones to make sure you, your family and assets are protected.”
About The Law Offices of Tony J. Tyre, Esq, APC
The Law Offices of Tony J. Tyre, Esq., APC is led by Tony J. Tyre, a Certified Specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization. Their attorneys draft living trusts, last wills and other estate planning documents, as well as advising clients regarding trust administration, probate, Medi-Cal planning and conservatorships. They have offices in Covina and Temple City, Calif.
For more information, visit the Tyre Law Group website or request a free estate planning and drafting consultation online.
Members of the editorial and news staff of Paste BN Network were not involved in the creation of this content.