Trust Glossary, Definitions, and FAQs
Amendments - Changes made, either by way of correction or addition. Beneficiary - The person for whose benefits a trust is created or the person whom the amount of an insurance policy or annuity is payable. The person designated to have and hold the equitable interest in a trust estate. In the case of a Pure Trust, the beneficiaries are the holders of Trust Certificate Units (TCU's). Business Trust - A common law contract arrangement whereby a legal entity is established similar in form to a corporation but taxed either as a corporation or as a trust depending on the laws of the particular jurisdiction in which the instrument is created, and in accordance with the terms and conditions of the agreement and the methods by which it is utilized. Any trust which by operation of state or federal tax law can be taxed in the same manner as a corporation. Often termed as "Massachusetts Trust", Unincorporated Business Organization, Business Trust Organization, Unit Trust, or Common-law Trust. Similar to "Pure Trust". Commonly abused by tax resistors and promoters. Not recommended. Capital - Principal or corpus or value of assets placed in trust. Charter Trust - See "Pure Trust" Civil Law - The legal system prevailing in the European, Asiatic, Central America, and South America countries which inherited their legal systems from Rome; in practically all except the English - speaking countries. Clifford Trust - A short-term irrevocable trust which lasts at least 10 years. When the trust ends, the principal is returned to the original owners. Common Law - That part of the law which has developed over time through court decisions and opinions rather than by state statue or other legislative process. The legal system prevailing in the English - speaking countries; that is, the United States and the countries making up the British Empire and Commonwealth of Nations. Originated in England. Different from that of Roman civil law. Compare Civil law. Common-Law Trust - See "Business Trust". Community Property - An undivided interest arising by operation of state statute, in real or personal assets owned during or acquired during marriage by the spouses. Can be nullified by transfer from one spouse to the other. Property in which a husband and wife have each an undivided one-half interest. Competent - Legally qualified; possessing adequate mental capacity. Complex Trust - Any trust in which the trustees have the discretion whether or not to distribute income, or a portion thereof, to a beneficiary or beneficiaries in any year. Contract - An agreement in which a party undertakes to do, or not to do a particular thing. The essential elements of a written contract are (a) parties competent to contract, whose names appear in the writing; (b) the subject matter of the contract, or a clear statement of what is to be done or not done; (c) lawful and valid consideration, and if made up of mutual promises, then a clear and explicit statement of what each party promises to do or not do; and (d) agreement of the signed parties. Contract Law - See "Law of Contract". Contract And Declaration Of Trust Indenture - See "Trust" and "Contract". Conveyance - The act by which title to property is transferred. Usually an instrument in writing. Corporation - An artificial being created by law and endowed with certain rights, privileges, and duties of natural persons. Corpus - The body of assets or property belonging to an entity, such as a trust or estate. The principal or capital of an estate, as distinguished from the income. Creator - A Creator in a document is the person who establishes a trust by conveying assets to it. aka Grantor, Settlor or Trustor. Declaration of Trust - An acknowledgment, usually but not necessarily in writing, by one holding or taking title to property that he or she holds the property in the trust for the benefit of someone for or to the use of another. See Trust Indenture. Deed - Written document by which the ownership of land is transferred from one person to another. Deed of Trust - Almost always is used as a protective device like a mortgage or used as a recorded document to notify and secure monies against real estate. Could be used for some other secured right. Decedent - The person who has died. Descendant - One who is descended in a direct line from another, however remotely; the same as "issue". Relatives. Devise - A gift of real property by will. A person who receives such a gift is called a devisee. Discretionary Trust - A trust which entitles the beneficiary only to so much of the income or principal as the trustee in its uncontrolled discretion shall see fit to give the beneficiary. District / District of Columbia / D.C. - A location within the continental United States, that is NOT a State or within any State of the United States. Designed by the originators and forefathers of the constitution as a separate place that cannot be controlled by any state. A safe, independent, small, city-like community, that is the central place of national government of the United States of America as a whole. Dividend Trust Certificate Units - Trust Units similar to "Stock" that cannot be attached, given away, or taken away that are limited to income (not principal). See similar "Equity Trust Certificate Units". Domicile - The legal residence of a person or entity. A person's domicile may or may not be the same as his or her residence at a given time. Dry Trust - Any type of trust without assets. A shell. Equity - A system of legal principals, rules, and law which arose outside the common law which has power to enforce discovery, and administer trust, mortgages, and other fiduciary obligations, administers and adjusts common-law rights were rights where the courts of common law have no means, and supplies a specific and preservative remedy for common-law wrongs where courts of common law only give subsequent damages. Its characteristic is flexibility and its aim is the administration of justice. Equity Trust Certificate Units - Trust Units similar to "Stock" that cannot be attached, given away, or taken away that are limited to principal (not income). See similar "Dividend Trust Certificate Units". Estate Tax - A tax imposed on a decedent's estate from effects of a will (or lack of a will). Executor - An individual or a trust institution (perhaps nominated in a will and) appointed by a court to carry out duties. Family Trust - A term loosely defined as any Trust that is to manage and protect assets for family members. Fee Simple - Absolute title. The kind of ownership which enables the owner to manage and control property. Fiduciary - An individual or a trust institution, a person, persons, acting for the benefit of another party. Foreign Corporation - A corporation organized under the law of another state or country. Funded Insurance Trust - A trust with assets which could be an insurance policy and/or other kinds of property. Grantor - Deed: The person transferring his title to another (the Grantee) under a deed. Trust: The same as Creator, Settlor, or Trustor. Homestead - On the simplest level, a document you file with the County Recorder, and when you do it, you gain a lot of protection for your home. More specifically, if you file a declaration of homestead, then some of your equity in your home will be protected against forced sale by creditors. Income-shifting - Determine where to funnel income to control tax brackets. Incompetents - Persons not able or competent to perform duties. Insurance Trusts - A trust specifically designed for insurance. Inter Vivos Trust - Any trust which is established during life. Intestate - Without a will. Irrevocable Trust - Any trust in which the creator retains no power to revoke or cancel the trust agreement. Joint Tenancy - An undivided interest in property held by two or more persons, who all hold the same title and rights of possession, at the same time, jointly, and under which the survivor or survivors take the entire interest. Judgement Proof - A person without assets or concern of lawsuits. Land Trust - Commonly referred to as an Illinois Land Trust, for houses, property, or other real estate (or notes and mortgages secured by real estate). Unique features for land ownership. Law of Contract - The basis upon which many contracts exist (as opposed to the Law of Statutes). The right to contract was exposed and granted by the U. S. Constitution. Law of Statute - Laws based on a single State of the United States. Usually binding in other states, but based upon state law. Most attorneys assume contracts are based upon the local state law, unless stated otherwise within the contract. Also, most attorneys will create contracts based upon their local state laws, because their license, training, and background is similarly based. Lawyer - "A licensed person practicing law instead of justice." Legal Ownership or Legal Title - An estate or interest in property which is enforceable in a court of law. Lien - A hold upon property until payment of a debt or duty. Life Estate - Only a benefit during the life of a person. Lis Pendens - "Suit pending"; notice of action. Living Revocable Trust, Living or "Inter Vivos" Trust - A trust created during the lifetime of the creator. Massachusetts Trust - See "Business Trust". Nevada Trust - A trust created based upon Nevada Law because of favorable laws regarding state taxes. Notary - A signature and seal by a Notary Public signifying that a specific person(s) has personally signed a document. Sometimes also attesting that an oath was stated as well. Passive Trust - A trust regarding which the trustee has no active duties to perform, being merely a titleholder or holding entity. Perpetuity Law - Any limitation or condition which may take away or suspend the power of alienation for a period beyond life or lives in being and 21 years thereafter. Person - Either a human being, corporation, partnership, trust, or other entity, unless shown that only a human being is intended. Personal Property - All property other than real property. Power - Authority or right to do or to refrain from doing a particular act, such as a manager's banking power. Power of Attorney - A document, witnessed and acknowledged, authorizing the person named therein to act as attorney-in-fact for the person signing the document. If the attorney-in-fact is authorized to act for his or her principal in all matters, he has a general power of attorney; if he or she has authority to do only specified things, he or she has a special power of attorney. Prenuptial Agreements - Agreements made before marriage about what will result of each spouse's assets and belongings they owned before the marriage in case of a divorce. Principal - In either a trust or a will, the real and personal property which initially makes up the corpus of the estate or which is subsequently transferred thereto from which income is produced; or in an agency relationship, the principal is the individual who authorized another to act on his or her behalf, which individual is also known as an agent. Private Trust - A trust created for the benefit of a designated beneficiary or designated beneficiaries, such as a trust for the benefit of the settlor's or the testator's spouse and children. Probate - Procedures which are followed under court direction and supervision to allocate property with (or without) a will. The court system takes authority over the assets of the estate of an individual and determines validity, distribution, and appoints a legal representative to manage the affairs for a large fee. Probate Court - The court that has jurisdiction with respect to wills and intricacies and sometimes guardianships, adoptions, etc.; also called court of probate (Connecticut); surrogate's court (New York); Ordinary Court (Georgia); Orphan's Court (Delaware, Maryland, New Jersey, Pennsylvania); and Perfect's Court (New Mex). Probate Fee - A fee pertaining to probate. Property - The assets that are owned by a person. Quite often refers to real estate, or an interest in real estate. Public Administrator - In many states, a public official whose main duty is to inventory, protect, move, and control all assets until a court determines the settlement of the estate of persons who died without appointed individuals and have assets not in a trust. Pure Trust - A irrevocable trust arrangement, based on the Laws of Contract, that does not have a Grantor, which that holds fee simple title to the trust assets, and has a termination date. The beneficiaries of which are the holders of Trust Certificate Units (TCU's). Additionally, the trust must not contain three of the following: Centralized management, Continuous Life, Easy transfer of beneficial interest, or Limited personal liability of trustees. Commonly abused by tax resistors and promoters. Not recommended. Quit-Claim Deed - A legal instrument by which one conveys all of his right, title and interest in real estate to another without giving any guarantees of any kinds as to what, if any, that right to, title, or interest in the property is. Real Estate - The right, title, or interest that a person has in real property that legally are classified as real; opposed to personal property. Reciprocal Trusts - Trusts made by two or more persons that make reciprocal provisions in favor of each other. Recordation - Notification to the public by filing with a government recorder that confirms trust existence. Revocable Trust - A trust which by its terms may be terminated. Rule against perpetuities - A rule of common law that makes void any estate or interest in property so limited that it will not take effect or vest within a limited period of time. State Inheritance Taxes - Only pertains to assets or residents in certain states. State Law - See "Law of Statute". TCU's / Trust Certificate Units - In a Pure Trust arrangement, the division of the right to receive distributed income and right to receive corpus at termination, into 100 units which represent one percent each of those rights. Tenancy-in-Common - A form of shared ownership where there is no right of survivorship. Tenants-in-common can own property in unequal shares, unlike joint tenants who each won an equal share of the property. Testamentary Trust - Any trust which is established by will, or does not take effect until the death of the Settlor. Testate - Leaving a valid will. Testator - A person who leaves a will or testament in force at their death. Totten Trust - A simple savings bank trust, revocable at any time before the death for the depositor/settlor. Trust - A relationship in which one person (the trustee) holds title (often subject to a number of conditions) to property for the benefit of another person (the beneficiary). A trust is commonly used when money is left to people inexperienced in its management such as children or as a tax saving device. A testamentary trust is one established by a will. Trust Deeds - See "Deed of Trust". Trust Organization Bylaws - Rules determining operations of trust. Trustee - The person(s) appointed conserve and administer the assets of the trust for the beneficiaries. Trustor - Same as Creator, Grantor, or Settlor. U.B.O. BUSINESS TRUST - See "Business Trust". Will - A legal document in which a person states who he wants to inherit his property, etc.