Legal Terms Chapter 31 - Trusts

Question 1

A-B trust

Answer 1

A type of marital deduction trust that reduces the taxation of the second spouse to die by limiting the amount in that person’s estate to a sum that is not taxable; also called exemption equivalent trust, bypass trust, and credit-shelter trust.

Question 2

Beneficial title

Answer 2

The right to beneficial enjoyment; also called equitable title.

Question 3

Beneficiary

Answer 3

The person who holds the beneficial title and one for whose benefit a trust is created; also called cestui que trust.

Question 4

Bypass trust

Answer 4

A type of marital deduction trust that reduces the taxation of the second spouse to die by limiting the amount in that person’s estate to a sum that is not taxable; also called A-B trust, exemption equivalent trust, and credit-shelter trust.

Question 5

Cestui que trust

Answer 5

The person who holds the beneficial title and one for whose benefit a trust is created; also called beneficiary.

Question 6

Cestui que use

Answer 6

Someone for whose use and benefit land are held by another; one may get profits but legal title is held by another.

Question 7

Cestui que vie

Answer 7

The person whose life determines the duration of a trust; the person on whose life the insurance is written.

Question 8

Charitable remainder annuity trust

Answer 8

A trust in which a fixed amount of income is given annually to a beneficiary, and the remainder is given to a charity.

Question 9

Charitable remainder trust

Answer 9

A trust in which the donor, or a beneficiary, retains the income from the trust for life or other period, after which the trust corpus is given to a charity.

Question 10

Charitable remainder unitrust

Answer 10

A trust in which a fixed percentage of income (at least 5% of the trust corpus) is given annually to a beneficiary and the remainder is given to charity.

Question 11

Charitable trust

Answer 11

A trust established for charitable purposes; also called public trust.

Question 12

Constructive trust

Answer 12

An implied trust that arises in favor of one who is defrauded when title to property is obtained by fraud.

Question 13

Conveyance in trust

Answer 13

A transfer of legal title to property by the settlor to a trustee to hold for the benefit of a beneficiary.

Question 14

Corpus

Answer 14

The body, principal sum, or capital of a trust, essentially the property held; also called trust fund, trust principal, trust property, and trust res.

Question 15

Credit-shelter trust

Answer 15

A type of marital deduction trust that reduces the taxation of the second spouse to die by limiting the amount in that person’s estate to a sum that is not taxable; also called A-B trust, bypass trust, and exemption equivalent trust.

Question 16

Crummey powers

Answer 16

Authority that gives trust beneficiaries the right to withdraw each year the money that is contributed to the trust that year.

Question 17

Cy pres doctrine

Answer 17

A French term that means as near as possible; a term used in gift or trust law when an intended gift or benefit fails because the named recipient doesn’t exist, and the court must determine who should next be given it.

Question 18

Declaration of trust

Answer 18

A written declaration by a settlor that he or she is holding legal title to property as trustee for the benefit of another person.

Question 19

Discretionary trust

Answer 19

A trust that allows the trustee to decide, in the trustee’s discretion, how much will be given to each beneficiary; also called sprinkling trust or spray trust.

Question 20

Domestic asset protection trust (DAPT)

Answer 20

A self-settled trust allowed in 16 states (as of 2017) that uses an independent trustee and which is designed to benefit the settlor with income but also protects these assets from the settlor’s creditors.

Question 21

Donor

Answer 21

A person who establishes a trust; also called grantor, settlor, and trustor.

Question 22

Equitable title

Answer 22

The right to beneficial enjoyment; also called beneficial title.

Question 23

Exemption equivalent trust

Answer 23

A type of marital deduction trust that reduces the taxation of the second spouse to die by limiting the amount in that person’s estate to a sum that is not taxable; also called A-B trust, bypass trust, and credit-shelter trust.

Question 24

Grantor

Answer 24

A person who establishes a trust; also called donor, settlor, and trustor.

Question 25

Implied trust

Answer 25

A trust that arises, by implication of law, from the conduct of the parties.

Question 26

Inter vivos trust

Answer 26

A trust that is created by the settlor when he or she is alive; also called a living trust.

Question 27

Irrevocable living trust

Answer 27

A trust that may not be rescinded or changed by the settlor at any time during his or her lifetime; settlor loses control of trust corpus for their lifetime.

Question 28

Legal title

Answer 28

Full, absolute ownership.

Question 29

Living trust

Answer 29

A trust that is created by the settlor when he or she is alive; also called inter vivos trust.

Question 30

Marital deduction

Answer 30

The amount that passes from a decedent to a surviving spouse and is not taxable under the federal estate tax law.

Question 31

Marital deduction trust

Answer 31

A trust that is arranged to make maximum use of the marital deduction that is found inthe federal estate tax law.

Question 32

Pour-over trust

Answer 32

A provision in a will leaving a bequest or devise to the trustee of an existing living trust, like a pour-over will.

Question 33

Precatory trust

Answer 33

An express trust that arises from the use of polite, non-commanding language by a testator in a will.

Question 34

Public trust

Answer 34

A trust established for charitable purposes; also called charitable trust.

Question 36

Resulting trust

Answer 36

An implied trust that arises in favor of the payor when property is transferred to one person after having been paid for by another person.

Question 37

Revocable trust

Answer 37

A trust that may be rescinded or changed by the settlor at any time during his or her lifetime.

Question 38

Rule against perpetuities

Answer 38

No interest in property is good unless it must vest.

Question 39

Spendthrift

Answer 39

One who spends money profusely and improvidently.

Question 40

Spendthrift trust

Answer 40

A trust designed to provide a fund for the maintenance of a beneficiary and at the same time to secure it against the beneficiary's improvidence or incapacity.

Question 41

Spray trust

Answer 41

A trust that allows the trustee to decide, in the trustee's discretion, how much will be given to each beneficiary; also called discretionary trust or sprinkling trust.

Question 42

Testimentary trust

Answer 42

A trust that is created by a will and that comes into existence only on the death of the testator.

Question 43

Totten trust

Answer 43

A bank account in the name of the depositor as trustee for another person; also known as payable on death account and poor man's trust.

Question 44

Trust

Answer 44

A right to ownership to property held by one person for the benefit of another.

Question 45

Trust deed

Answer 45

An instrument that creates a living trust; also called a trust indenture.

Question 46

Trustee

Answer 46

The person who holds the legal title to the property for the other's benefit.

Question 47

Trust indenture

Answer 47

An instrument that creates a living trust; also called a trust deed.

Question 48

Vest

Answer 48

To give an immediate, fixed right of present or future enjoyment.