While trust and estate plans and documents can be fairly complex in order to achieve your objectives, the concept of a trust itself is quite simple. Think of your trust as a legally created vessel into which you can place some or all of your assets for your own benefit or for the benefit of others. The person who creates the trust and places assets in the vessel is called the grantor or settlor. Anyone who is entitled to benefit from assets in the vessel is called a beneficiary. Your trust document states who is responsible for holding the vessel and provides a set of instructions for the vessel holder to follow regarding the assets in the vessel. The clearer the instructions in your trust documents, the easier it is for the holder of the vessel to understand what you want them to do with the assets inside the vessel.
The trustee is the person or entity you have designated to hold the vessel. You can be trustee of your own trust during your lifetime if you choose. You may have heard this type of trust called a living trust. You can also name someone else to serve as trustee during your lifetime. If more than one person or entity is serving as trustee at the same time, those parties are called co-trustees. If the trust instructs that someone else should serve as trustee in the future, for example, when you or the current trustee are no longer able or willing to serve, that party is called a successor trustee. A successor trustee has no authority over the trust until it is their turn to serve.
Your trust document may permit your trustee to delegate some or all of the trustee responsibilities to someone else to perform. Typically, trusts will permit delegation of the types of responsibilities that are better served by a professional, such as investment management, trust administration, or tax preparation. If your trust permits such delegation, the person or entity to whom you or your trustee delegate those responsibilities is called an agent. Individuals such as family members who are serving as trustee often delegate responsibilities to a corporate trustee when they don’t have the time or expertise to perform those duties themselves.
Your will is a document where you can designate an individual, called an executor or personal representative, to wind up your affairs and distribute assets from your estate after your death to persons or entities you name in your will. Your will does not apply to any assets that you have already placed into your trust during your lifetime. However, even when you create a trust during your lifetime, your attorney will typically draft what is called a pour-over will. A pour-over will instructs your executor to pour into your trust some or all of the assets that are outside of your trust on the date of your death. A pour-over will can be very helpful if there are assets that you have intentionally or accidentally failed to transfer into your trust during your lifetime. Your will can also instruct your executor to create a trust upon your death. Trusts created under your will upon your death are called testamentary trusts.