Trust Terms Definitions - YouTube

Hi. Lee Phillips.

I'm an attorney and I've actually written a book about living revocable trusts

it's called Protecting Your Financial Future

it's good book

it's been a Time Warner Book of the Month Club book

which means that Time Warner thinks that

the little old ladies ought to read it in their book clubs

and it's also

11 hours of continuing education for certified financial planners.

That means it's technically pretty good

and it's a good read.

It is a fun read

In it I talk about terms that you need to know

when you talk about living revocable trusts

let me go through some of them

so that you'll kind of know what you're talking about

when you talk to somebody about a living revocable trust

that might be an attorney,

the kids, whoever.

The guy who sets up the trust is called the grantor

they'll call him the settlor

They'll call him the trustor

he's the "or" guy

and I don't know why we have three terms for the guy

but the guy that sends it up is the grantor, the settlor, or the trustor

same guy

and he's the one that writes the trust

and he's usually the one that puts the money or the assets

into the trust

you can have another person be the settlor

and settle the trust

and then it could be another person who puts assets into the trust

and they do that sometimes for tax reasons

but mom and pop

you're probably not going to worry about it

sometimes they'll do it for asset protection purposes

so that we don't have what's called a self settled trust

that's a trust that you are the settlor yourself

and basically the law says that you can't have a self settled trust

which separates you from the assets

and protects them from your creditors.

Self-settled.

That's the guy that the trust--I remember that

The guy who is the

manager of the trust is called the trustee

and basically

there's only one word for that guy--he's the trustee

and he's the one responsible for

executing

management of the assets

executing the terms of the trust

and if you really understood what a trustee was

and we have other YouTube videos on trustees

you would never be a trustee

because the fiduciary duty

oh that's the standard of care

basically that the trustee is held to

is the fiduciary duty

of the trustee

and the fiduciary duty is very high

that trustee is obligated to execute on the terms of the trust

and to do that which is best for the beneficiaries

so it is an extreme--it's one of the most well defined standards

in the law

and it's a high standard

it's a real high standard.

The beneficiary is the guy who gets the

benefit of the trust.

You can have numerous beneficiaries

you can have one beneficiary

and he's kind of got one name and that's the beneficiary.

y I you could think of him in your estate planning

your living revocable trust as the heir

although you get to say who the heir is

the beneficiary is

and the trustee is obligated under the fiduciary duty

to take care of the assets

on behalf of the beneficiary.

Beneficiary doesn't own the assets

the trust owns the assets

technically

actually the assets are owned by the trustee

in their capacity as trustee.

They don't own in them in that they can't go bankrupt and lose them or anything

but technically title is held

in the name of the trustee.

So we have the trustee

who takes care of everything

under the fiduciary duty

for the beneficiaries

Now you're gonna set up your living revocable trust

and the funny thing is

you're gonna be the grantor, the trustor

whatever you're gonna call the guy

you set it up

you're going to be the trustee, you manage it

and you're going to be the beneficiary

you get the benefit of it

so you hold all three positions

and when you hold all three positions

that's a special type of trust

It has a specific name,

it's called a grantor trust.

and the IRS says that if it's a grantor trust

they disregard it.

They don't pay any attention to it.

And we've got another video on grantor trusts.

But the IRS doesn't pay any attention to it.

You use your Social Security Number

and all of the income

are yours.

So you have to pay tax on it.

Now if the trust is one that can accumulate income

that's called a complex trust.

You do not want a complex trust

or at least you don't want a trust that actually accumulates income

because the tax rate is horrid.

At $12,600 and something it gets to the highest tax rate

which is what now 36%?

It used to be 39.7% or whatever it was

I mean it's horrible-you don't want one.

You want to pay all of the money out

if it's one that requires all money to be paid out

and can't accumulate money within the trust

then it's called a simple trust.

complex trust / simple trust

these are some of the terms that you're going to run into

when you work with trusts

so you might as well understand what they're talking about

oh one more

the property in the trust

is the corpus of the trust

or the trust estate

those two terms are used for that regularly.

Anyway, Lee Phillips talking about terms in living revocable trusts.