ESTATE PLANNING TERMS AND DEFINITIONS
Settlor or Grantor
The Settlor is the individual who creates the Living Trust. The Settlor has the power to amend or revoke the trust and to name the beneficiaries who will receive the trust property after the death of the Settlor. The Settlor has the absolute power over the trust assets. Example: the Settlor may buy, sell, borrow against, and transfer the assets.
The Trustee is the individual who handles the management of trust property and the administration of the trust. When a trust is first created, the Trustee is usually the Settlor. If not the Settlor, the acting Trustee has the power to buy, sell, borrow against, and transfer assets but cannot amend or revoke the trust. Corporations such as banks or trust companies can serve as Trustees.
A Successor Trustee must be named to succeed you as the manager of the trust upon your death or incapacity. If you are married and one spouse becomes incompetent, the other spouse can act alone as Trustee. If a married couple or single person is unable to continue serving as Trustee because of death or incapacity, the person you name as Successor Trustee will step up to serve in your place. The Successor Trustee usually has the responsibility of distributing the trust assets to the beneficiaries. The Successor Trustee must manage the assets in the Trust in a prudent manner and strictly in accordance with the Trust instructions. The predominant characteristic of the Successor Trustee is trustworthiness.
Individual(s) to whom you desire to leave your assets. Examples are your children, relatives, close friends or charities.
Individuals who you indicate for assets to be left to if your chosen Beneficiaries fail to survive you.
Executor (California) or Personal Representative (Arizona, Colorado)
Although we usually recommend naming the same individual as your Executor and Successor Trustee, the Executor should not be confused with the Trustee. The Successor Trustee is responsible for all the assets funded into the trust; the Executor (named in the Pour-Over Will) is the administrator for all assets left outside the trust. The Executor is necessary in case any probate action is required to settle the estate if any assets were inadvertently left outside the trust. After the probate process has been completed, the Executor would then pour the probated assets over into the trust. Of course, if you have properly placed all your assets within the Living Trust, no probate action will be necessary.
Guardian(s) must always be named for minor children. This is a nomination which will require Court approval. These individuals would take physical custody of your minor children in the event of your incapacity or death. In Colorado, this term also applies to a court-appointed protector of an incapacitated (e.g., special needs or elderly) person who is unable to make decisions on his or her own.
Conservator(s) are appointed by the court to protect the finances of persons who are unable to manage on their own. This is appropriate and necessary for minor children whose parents are deceased or otherwise deemed incompetent and is also used to protect the finances of incapacitated individuals, such as those who have special needs or are suffering from dementia.
Agent or Attorney in Fact - Finances
This person is empowered by a document called a Power of Attorney for Asset Management and Personal Affairs. This Agent acts regarding assets that are outside the trust either by accident or design, at a time when you are incapacitated.
Agent - Health Care
This person is empowered in California by a document called an Advanced Directive for Health Care and in Arizona and Colorado by a Power of Attorney for Health Care. This document allows the named Agent to make health care decisions for you, including directing your doctor and other health care providers, making choices about end-of-life decisions, and giving instructions on the disposition of your physical remains. Absent this document, children do not have automatic authority to serve in this capacity for their parents, and parents do not have automatic authority to serve in this capacity for their adult children.