Trust Naming 101: Understanding the Language Behind Trust Agreements
Trust agreements and the language behind trust naming can be difficult to comprehend. There are both legal and practical reasons for the trust to be named and referenced as it is. Have you ever wondered what a trust truly contains, or have you ever found it difficult to interpret terms used in legal documents? If you’ve been thinking about these questions, you’ve come to the right place. In this blog, we will go over the terminology, the function of trustees, document references, and the relevance of dates and privacy in trust agreements. By the end of this article, you will feel more assured and have a deeper understanding of the trust components and legal factors involved in trust naming.
What’s in a name?
First, before you can understand the name, you must understand that a trust is a type of an agreement. Contracts and constitutions are other legally recognized agreement types, but a trust is unique relative to each of those. A trust has its own nominal structural components. On the first day of law school, we learn that the unique structure of a contract is offer (promisor), acceptance (promisee), consideration, etc. The unique structure of a trust agreement is offer (trustor), acceptance (trustee), beneficiary, trustee instructions, etc. A trust does not have a chartering document filed with or recognized by any government authority. Consequently, (as an agreement) a trust itself does not qualify and is not identifiable as a legal “person” and cannot (itself) technically hold title to any property.
Trustees
Only natural and legal persons have the legal capacity to hold or own a right, title, or interest in property. This isn’t to say that attorneys or financial institutions don’t try to vest title in the name of a trust agreement, incorrectly treating it as if it were some chartered entity. In doing so, they are assuming a trustee (with trustee instructions) will be found somewhere, sometime. But, for title to land to properly vest, some legally recognized “person” must be identified as the Grantee. In the case of a trust, someone must accept responsibility to carry out the terms (part and parcel to) of the trust’s instructions. The law needs to know who accepts that responsibility. If no one assumes responsibility, we have no trust. Some courts or legislatures have made attempts to close the loop here by recognizing a document reference (e.g., a transfer to the “Smith Living Trust”) in a deed or some other “document of title”, so check your local law.
These are merely the basics. The bottom line is if your transfers are always made to the people who are the “trustees” (in their official capacity), subject to the terms of the trust, you should never have a problem. After all, the trustees are the one’s being trusted, right?
Document References
As an agreement (typically a written agreement), the trust agreement can carry any old “title” at the top of page 1 of the document that you want. The trust’s name is usually a reference to the latest edition of a piece of paper. I once had a client choose to name his trust the “Super Cool Trust.” His wife then decided to name her trust agreement the “Cooler Than Yours Trust.” Another client wanted “Alpha” and “Beta” named trusts for each other. That’s uncommon, though.
In any event, today I at least prefer my Revocable Living Trust-style trusts to end with the words “living trust.” I do that as a practical shortcut—a code, if you will—so I know what type of trust document I put together in this particular case for this particular client. I’ve seen other offices do the same with the words “domestic asset protection trust” or similar terms for different types of trust agreements. There have been offices that adopt “101 trust” or other pet names that are used internally for their offices. In some cases, a person can go out and market the name as a specific “type” of trust. However, the type of trust is determined by its terms, not by its name.
Terms
As mentioned before, the terms are really what make a trust agreement what it is. These are the instructions the trustees are charged with carrying out and dictate how the arrangement is treated by government authorities. Revocable, irrevocable, completed gift, incomplete gift, grantor, non-grantor, asset protection, spendthrift, and countless other descriptive words (and acronyms) are references to features of the terms of trust agreement. So, once you review the document, you discover that a “101 trust” is really someone’s shortcut for an irrevocable, grantor, incomplete gift, domestic asset protection trust.
Dates
Trusts generally keep the date of their first establishment, even if the agreement is amended or restated. For example, the more formal name of the “Smith Living Trust” might be “Jane Smith and John Smith, Trustees, or their successors in interest, of the Smith Living Trust dated January 1, 2000, and any amendments thereto”. This practice avoids having to re-vest title in the trustees pursuant to the terms of a new document. The amendment or restatement is deemed to be a mere extension of the original agreement, and that promotes efficiency and saves unnecessary fees.
Privacy
People routinely want to keep their names out of public records. Understanding all the above will help you and your attorney figure out if you can do that, and how you might go about doing that. Your goals might direct your choices. First, if the trust agreement is given a header using your name, then your name will be in the public record. You can choose a different document name by which to reference the trust. Next, if you are a trustee, then your name will be in the public record.
For privacy, you will need to identify a trustee who is okay with their name being in the public record. It doesn’t need to be a professional trustee. Trust clauses exist that say that property in the name of one trustee (not all) of the trust is still in the whole trust. So, that might be helpful in the right circumstance, too.
In conclusion, the process of naming a trust is not a basic formality but a thoughtful decision that carries legal implications and practical considerations. The name chosen for a trust should be carefully considered, as it will play a significant role in legal and administrative contexts. Whether reflecting personal style choices or aiming for practical identification, the name of a trust should be chosen with care to ensure its effectiveness and adherence to legal requirements. By giving due consideration to the naming process, individuals can establish trusts that accurately represent their intentions and provide a solid foundation for the successful administration of their assets.
Written by Jeffrey Q Cardon