How to Identify the People Associated with a Trust
As a trustee, identifying the people associated with the trust you are administering is one of your important first steps. You need to know who the beneficiaries and remaindermen are. You will also want to know if the beneficiaries have a present interest, future interest, or contingent interest.
Here is a list of the typical individuals associated with a trust:
Grantor: Sometimes called the settlor, this person creates the trust.
Trustee: The person or corporation charged with safeguarding and managing the assets of the trust and making distributions to beneficiaries in accordance with the grantor’s stated wishes in the trust instrument. The trustee can be either independent or non-independent, and trusts may have either type of trustee or both.
Independent trustee: An independent (or professional) trustee is one the IRS considers independent of the grantor and the beneficiaries for estate tax purposes. That way, the principal of the trust isn’t included in the beneficiary’s taxable estate upon his or her own death.
An individual independent trustee: An individual who is, hopefully, an expert in trust administration, such as an attorney, accountant, or enrolled agent.
A corporate independent trustee: A bank or trust company whom the grantor appoints as trustee. This entity always qualifies as an independent trustee.
*Family or non-independent trustee: A family or non-independent trustee is one who is the grantor or a beneficiary (or is related to the grantor or a beneficiary in such a way that he or she wouldn’t be considered independent for estate tax purposes). Grantors frequently use family trustees with independent trustees so that a family member or another non-independent source can give input on trust matters that don’t affect the trust’s tax status.
Beneficiary(ies): Beneficiaries are those people or entities having an interest in the trust, whether now (a present interest) or in the future (a future interest). An interest as a beneficiary can also be contingent (relying upon an event in the future that may not happen) or vested (not subject to any contingencies).
Remaindermen: Remaindermen are those people or entities who will receive the trust property after an interest in it has expired. If, for instance, Uncle George leaves his property in trust for the lifetime of his wife, Aunt Rose, for her benefit, with the property to go outright to his nieces and nephews upon Aunt Rose’s death, the nieces and nephews are the remaindermen.
You, as trustee, are balancing the rights of the current and future beneficiaries and the remaindermen when you make your judgments as to distributions of principal and trust investments. If principal distributions are discretionary, assets left in the trust to accumulate benefit later beneficiaries and remaindermen. Your decisions as to what mix of income earning and growth investments to hold in the trust affect both the income of beneficiaries and the remaindermen.