Common Terms in Special Needs Trusts
Over the past 30 years, our clients have found it useful to learn some common terminology that comes up during the special needs planning process, particularly, when creating a trust with the help of their lawyer.
- Grantor: Also known as the settlor or trustor, a grantor is the person who creates and funds the trust. Grantors are deemed beneficiaries in firstparty SNTs, unlike for thirdparty SNTs.
- Trustee: This is the person or entity who manages the assets in the trust and carries out trust provisions. It is common for a trust to have more than one trustee.
- Successor Trustee: Nominated by the trust agreement, a successor trustee is the person or entity who takes over when the initial trustee can no longer serve.
- Beneficiary: This is the person who the trust is established for.
- Remainder Beneficiary: These are the beneficiaries who receive the remaining assets when a trust ends.
- Compensation: Compensation is afforded to trustees for their services and is reported as taxable income.
- Trust Estate: A trust estate includes all assets within the trust, including earned income from invested trust assets.
- Schedule A: Commonly known as a schedule of assets, Schedule A lays out all assets owned by a trust.
- Irrevocable: All first party SNTS are irrevocable, meaning these trusts cannot be changed. However, third partySNTs can be either revocable or irrevocable.
- Revocable: As we said before, only third party SNTs can be revocable. A revocable trust allows the grantor to revoke or revise the terms of the trust.
- Testamentary: A testamentary trust is created under a last will and testament, therefore, it is not effective until the will creator dies. This can only be applied to third party SNTs.
- Inter vivos: Latin for “among the living” or “during life,” an inter vivos trust is established during the grantor’s lifetime. As such, all first party SNTs are inter vivos.
- Disability: First party SNT beneficiaries must have certain disabilities to qualify. For information on the disabilities recognized by the Social Security Act (SSA), you should consult with your lawyer.
- Bond or Surety: A bond protects trust beneficiaries from potential fraud, negligence, or loss of trust assets by the trustee. Sometimes, courts or Medicaid require the trustee to obtain a bond.