A trust can be a valuable tool for managing your assets during life and at your passing, especially when executed as part of a comprehensive estate plan. Though there are specific types and structures involved, the general definition of a trust is an arrangement where a property is owned and managed by an individual for the benefit of another person or group of people. The term also encompasses the written document which contains the directions that designate how and when to pass assets to beneficiaries.
California’s Probate Code has a section on Trust Law that governs the creation, restrictions, modification, and administration of trusts; however, the statute can be difficult to understand unless you have a glossary of the key terms of trusts in a California estate planning strategy.
The person who creates the trust by contributing property and signing the respective documents is the grantor. There may be more than one individual acting as grantor to a single trust, and the rights and obligations between the various grantors are subject to the terms and conditions in the instrument.
The recipient and holder of trust assets is the trustee, who manages the property according to the instructions of the trust instrument. This individual does not legally own the assets, but does have control over them. In most trust arrangements, there will be an initial trustee, as well as a number of successors in the event that the first person is unable to act. Trustees are obligated to manage the trust as directed by the document, and also in accordance with their fiduciary duties.
As it relates to a trustee, a fiduciary duty is to act with the highest degree of care with respect to the trust assets. Duties include loyalty, which mandates that the trustee not take advantage of the trust relationship for his or her own benefit. The obligations of a person with a fiduciary duty also include acting in good faith and to invest prudently, i.e., using the same care that the trustee would use in managing his or her own assets.
Anyone who is designated to receive the benefit of trust assets, such as funds from trust income or principle, is the beneficiary. Timing, amount, and other factors related to distribution of trust benefits to a beneficiary are included in the trust instrument.
Discuss Trust Details with an Estate Planning Attorney
If you have questions about trusts and relevant terminology, please contact the Law Office of Charles D. Stark in Santa Rosa, CA. We can tell you more about how trusts work and other options for effective estate planning.