Wills, Trust and Estate Administration, Ch. 8

split title

after the creation of a trust, title to property placed in the trust passes to at least two persons. the title is split into legal title and equitable title. trustee equals legal title. beneficiary equals equitable title.

restatement of trusts

set of rules of law affecting trust creation

Legal title

The form of ownership of trust property held by the trustee giving the trustee the right to control and manage the property for another's benefit. Someone who possesses all ownership interest.

stock dividend

a dividend of shares of stock distributed to stockholders

declaration of trust

a document that creates a trust in which the settlor is also the trustee

Elements of a trust

a settlor who creates the trust, one or more trustees who administer and manage the trust, one or more beneficiaries who receive the benefits (income or principal) and enforce the trust, and real or personal property that must be transferred to the trust.

Trust

a trust is a property arrangement in which real or personal property is transferred from the settlor to one or more trustees who hold the legal title to the property for the benefit of one or more beneficiaries who hold the equitable title.

revocable trust

a trust that the settlor has a right or power to cancel or revoke

Revocable living trust

a trust that the settlor has a right or power to revoke or change at any time prior to death. It must be stated in the trust instrument. otherwise trusts are generally irrevocable. Property placed in revocable living trusts become non probate assets and may be subject to creditors claims. subject to federal estate tax.

trust instrument

a written instrument that creates a trust like a will, trust agreement or declaration of trust.

principal

capital or property of a trust as opposed to the income, which is the product or profits generated by the capital.

conflict of interest

divided loyalties; attorneys cannot represent both sides in a dispute

Declaration of trust

document that creates a trust in which the settlor is also the trustee. the document declares the creation of a trust in which the settlor names himself as trustee and retains the legal title but transfers the equitable title to the trust property to another person, the beneficiary.

income

financial gain measured in money that is generated from the principal

irrevocable living trust

once created cannot be revoked or changed by the settlor. not subject to probate or federal estate tax.

stock split

one share of stock is split into a larger number of shares resulting in a proportional change in the number of shares owned by each stockholder

income beneficiary

person or charity that's entitled to receive the income produced from trust property (principal)

Trustee

person or institution who holds legal title to property in trust for the benefit of one or more beneficiaries.

Beneficiary

person who has the enjoyment and benefit of the property, holds equitable title for example, has the right to the benefits and profits of the trust.

Trust Property

real or personal property that the trustee holds subject to the rights of one or more beneficiaries. Trust property may include any type of asset, such as cash, securities, real estate or life insurance policies.

Equitable title

refers to the right of the beneficiary to receive the benefits of the trust.

Settlor

the person who creates a trust is the settlor, also called the creator, donor, grantor, or trustor.

disclaimer

the right a person has to refuse or reject appointment as trustee of a trust

a settlor

to be a settlor a person must own a transferable interest in property, have the right or power of disposing of a property interest, and have the ability to make a valid contract.

Will

a trust included in a will is called a testamentary trust.

irrevocable trust

a trust that may not revoked by the settlor after its creation

trust agreement

a written contract between the settlor and trustees that creates the trust and is signed by them.