The last two weeks focused on the core estate planning documents and why it’s a good idea to keep your documents in good order. This week, I will define the major players in the documents, hopefully putting some of the legal terms in plain English.
Since this article will stand alone on our website, I want to state that I’m not a lawyer, Acropolis isn’t a law firm, this isn’t legal advice, and we strongly recommend seeking out a qualified estate lawyer licensed in your state.
Grantor
The grantor is the person who creates a trust and decides what the trust should accomplish. There’s a good chance that you’re the grantor, but it could be your parents, grandparents, or someone else. Hopefully, with the help of a lawyer, the Grantor forms the trust, names the trustee (or trustees) and the beneficiary (or beneficiaries), and specifies how the trust will be managed.
Trustee
The grantor picks the trustee (or trustees), but what’s that? A trustee manages a trust for the beneficiaries. They are responsible for carrying out the trust’s instructions, filing tax documents, and managing and distributing the trust assets. In theory, anyone can be a trustee, but you have to be careful who you select. Most people pick trusted friends and family members, attorneys, or corporate trustees, like trust companies.
Beneficiary
This one may seem kind of obvious, but it’s the person who benefits from the trust. Current beneficiaries have the right to receive income or distributions now, while the “remainder” beneficiaries receive assets after the current beneficiaries’ interest ends.
Executor
The first three players I’ve mentioned are generally named in a trust, but as noted last time, there may not be a trust. An executor is named in a will and is the person who settles an estate. The executor handles the probate process, paying off debts, distributing taxes, and filing the final tax return (sounds like a trustee, doesn’t it?).
Power of Attorney Agent
I noted last week that there are typically two powers of attorney, one for financial decisions and one for medical decisions. They can be the same person, but that isn’t required. As you might assume, the medical power of attorney makes decisions about surgeries, treatments, etc., and the financial may pay bills, file taxes, manage investment accounts, etc.
Guardian
Guardians care for and make decisions on behalf of minor children. They help raise the child if the parents have died and or are incapacitated, make sure the child enrolls in school, gets medical care, provide food and shelter, etc.
Conclusion
This list illustrates why estate planning is about much more than tax savings—it’s about people. The people you trust to take care of what matters most.
And as I’ve said before, life changes. People move, pass away, or simply aren’t the right fit anymore. While most legal documents name backup options, it’s still essential to make sure your documents reflect your current wishes.
