Get a Consultation

Hess-Verdon & Associates

Call us Today

Who are the parties in an estate

Trust and Estate Overview

Living trusts are critical in estate planning. Understanding the parties involved in estate planning helps you prepare and create an estate plan that works for you. Read on to learn more about these parties to understand how the process works.

Who are the parties of an estate?

Three major parties hold the stakes in any living trust: the beneficiary, trustee, and trustor. These parties play a vital role in creating and administering a trust. It’s critical to understand their positions if you plan on creating a reliable estate trust.

Request a Case Review Today

Call us at 888-318-4430

Who Are The Parties Of An Estate
Probate Attorney

Who is the Trustor?

The trustor refers to entities that create and open a trust. They may be individuals, married couples, or organizations. Generally, trustors make asset contributions that are added to the trust. They donate gifts, assets, or money to other individuals.

A trustor usually sets up trusts as part of real estate planning by transferring their fiduciary duty to third-party trustees who maintain the assets in trusts for the beneficiaries’ benefit. Legal descriptions also refer to trustors as settlers or grantors.

Understanding Trustors

Estate planning refers to a financial service that helps organizations or individuals manage, distribute, or preserve assets in case of illness or death. This process commonly serves assets like property, vehicles, investments, money, debt, life insurance policies, and personal property, including jewelry, artwork, and other valuables.

Entities that set up trusts are called trustors, grantors, or settlors. Both parties meet to form a trust. Trusts refer to legal entities that hold and safeguard the trustor’s assets.

Trusts provide legal protection for the assets the trustor wants to donate to beneficiaries, including their next of kin or various entities. Trustors can create various types of trusts, such as testamentary trusts, living trusts, blind trusts, and charitable trusts, each with specific purposes and benefits.

Special Considerations

Fiduciary duty is a vital relationship between trustors and trustees. Trustors transfer their responsibilities to trustees when turning over assets. Fiduciaries have the legal authority to hold and manage assets for the beneficiary’s benefit rather than their own, thereby preventing any fraudulent activities when dealing with beneficiaries.

Who is a Beneficiary?

Beneficiaries are individuals or entities designated to receive benefits from assets owned by other individuals, mostly as part of an inheritance. They can be designated in documents relating to life insurance policies, brokerage accounts, bank accounts, retirement accounts, and other financial products. Designating beneficiaries for financial assets is crucial for asset distribution upon the trustor’s passing.

How Do Beneficiaries Work?

  • An organization or person can be designated as a beneficiary.
  • A beneficiary receives property after the trustor dies.
  • Benefactors or individuals can stipulate how their property is disbursed.

Beneficiaries may also face tax consequences when inheriting some financial assets. Trustors should name beneficiaries to prevent financial institutions from making decisions about asset distribution, which could lead to assets being tied up in probate, leaving the distribution of assets to the state’s discretion.

Why Are Beneficiaries Significant?

  • Helps control asset distribution.
  • Simplifies asset distribution.
  • Protects individuals designated for financial accounts like retirement and insurance policy accounts in case of changes in a will.
  • Names of beneficiaries remain private.

Types of Beneficiaries

Primary: These are the first choice of beneficiaries for trustors. They receive all assets in case the beneficiary passes on.

Contingent: These are the second beneficiaries. They receive assets from the trustor if the primary beneficiary is missing or dead, as explained in How to Handle Uncooperative and Missing Beneficiaries.

Need an Estate Planning Attorney?

Who is the Trustee?

Trustees are individuals or firms tasked with holding or administering property or assets for the benefit of a third party. They might be appointed for various purposes, such as managing charities, bankruptcy estates, trust funds, pensions, or retirement plans. Trustees are expected to make prudent decisions in managing assets for beneficiaries, thereby upholding the trust’s objectives.

One key role of trustees includes holding the legal title of assets for beneficiaries, which is established through a trust—a legal agreement between two consenting parties. The responsibilities of trustees involve managing properties and all assets held by the trust, which are defined by the specific terms of the trust agreement.

Furthermore, trustees play a crucial role in overseeing and financially managing accounts, especially when these accounts consist of investments like brokerage accounts or equities. Regardless of the specifics of the trust agreement, trustees have general responsibilities and guidelines to follow. This includes ensuring the safety and control of all assets managed by the trustee.

In addition to adhering to the trust’s specific terms and considering the beneficiary’s best interests, trustees must ensure that all investable assets are productive and contribute positively to the beneficiary’s future. Trustees are also responsible for preparing all necessary records on behalf of the trust, including tax returns and financial statements. Effective communication with beneficiaries about taxes, accounts, and other relevant matters is also a critical duty of trustees.

Conclusion

Navigating the complexities of estate planning can be challenging without a thorough understanding of the roles involved, such as those of trustors, trustees, and beneficiaries. At Hess-Verdon & Associates, our team of experts is ready to guide you through the estate planning process. For professional legal advice and assistance, please reach out to us through our contact page or by calling 949-706-7300.

Who Are The Parties In An Estate. Trust And Estate Overview

“Absolutely top notch firm for handling all your estate planning matters.”

Dean Williams

Client Since 1995

Who Are The Parties In An Estate. Trust And Estate Overview

“Jillyn’s expertise and positive attitude, also wonderful staff. Jillyn’s the best!”

Mary Sipe

Who Are The Parties In An Estate. Trust And Estate Overview

“Jillyn’s knowledge. Always does a terrific job of explaining everything.”

Carol Netta