Say What? Trust Terminology Defined
Lawyers use a lot words when talking about trusts, often assuming that everyone knows their meaning. But in speaking to clients and friends, I realized that many people outside the legal community don’t understand what we are talking about. Below are some of the most common terms defined:
- Trust: A trust is a legal arrangement in which a settlor transfers ownership of his or her assets to trustee, who then manages and controls the assets for the benefit of a third person, called a beneficiary.
- Settlor: The person who creates a trust or contributes property to a trustee of a trust. A settlor is also known as a “grantor” or “trustor”.
- Trustee: The person or entity who manages the assets placed in trust and distributes property according to the terms established by the settlor.
- Beneficiary: The person for whose benefit the property is held in trust.
- Principal: The assets owned by a trust.
- Revocable Trust: A trust that can be amended or revoked during a specific term, usually the settlor’s life. In Texas, trusts are presumed to be revocable
- Irrevocable Trust: A trust that cannot be revoked by the settlor.
- Intervivos Trust: A trust created by the settlor which takes effect while the settlor is still alive. It is also known as a living trust.
- Testamentary Trust: A trust created by a will that takes effect after the settlor’s death.
- Spendthrift Clause: A clause that prohibits a beneficiary from selling, giving away, or otherwise transferring the beneficiary’s interest, and prevents a beneficiary’s creditors from reaching the beneficiary’s interest in the trust.
- Pourover Will: A will directing that certain assets be transferred (poured over) into a trust upon the death of the person who created the will.