Knowing the basic terminology in any new area of study is a key to understanding the topic as a whole.  This is particularly true with estate planning and trusts where unfamiliar terminology abounds.  This post will specifically go through some of the more common nomenclature surrounding trusts and trust planning.

What is a trust is best approached by first going through the different parties involved?  There is the beneficiary who is the person or entity entitled to any part or all of the trust estate.

The grantor is the creator of the trust, sometimes also called the “creator” or “settlor.”

Next is the trustee who is the person or entity charged with managing the property in the trust.  The trustee can be a person or a corporate trustee, which is any trust company or bank authorized to exercise fiduciary powers that has an office in this state.

Now that we have the parties, we can talk about the trust itself.  The trust is a legal arrangement whereby a trustee is named to manage and use the funds for the benefit of the beneficiary.

The trust created in a Will is called testamentary trust.

A trust created by an individual (remember the grantor above?) during his or her life and funded during life is a living trust (also called an “inter vivos” or “lifetime” trust).  A lifetime trust is irrevocable unless it expressly provides that it is revocable.

The trust holds property (also called the trust corpus) which can be anything that is the subject of ownership and is real or personal property.

The trust assets and expenses are allocated between income and principal based on the statute.  The statute defines income as the “return of money or property derived from the use of principal.” EPTL 11-2.1(b)(1).  This can include rent, interest on money lent or on bonds, dividends, receipts from principal used in business, among other examples.  Principal is “property, disposed of in trust, the income from which is payable to or to be accumulated for an income beneficiary and the title to which is ultimately to vest in the person entitled to the future estate.”  EPTL 11-2.1(b)(2).  This includes capital gains, proceeds from sale of business assets, and refunds.

Obviously there are many other terms but this post should help establish some basic vocabulary so that a discussion with your estate planning attorney can be more fruitful.