Estate or Trust? It’s All the Same Thing Anyway, Isn’t It?
By: Helen Cripps | Published January 24, 2018
People often use the words “estate” and “trust” interchangeably, thinking they’re really just the same thing. But they are not. While this blog could get really technical, I really would like to just point out one situation where it makes a big difference whether we are talking about a trust or an estate, and that is after someone’s death.
Generally speaking, the word “estate” can refer to everything a person owns at any given point in time. It actually includes a trust in this context. But “estate” takes on a whole new meaning after death. It really would help if we always used a qualifier with it – like “probate estate” or “gross estate” (this is usually a tax thing). Most of us don’t bother.
For purposes of this blog, I’m talking about the probate estate that sometimes occurs after the death of an individual. In this case, the person (or corporation) who is in charge is the personal representative. People often refer to this position as an “executor”. A few states still use that term, but Missouri has been using personal representative for many, many years. A very common misconception is that if a person is named in the Will as personal representative or executor, then that’s it. They’re it. Some even think they are the “executor” even before death of the individual! Neither is true.
Naming someone in a Will as the personal representative (executor) is really only a nomination. The actual appointment is made by the Court after death and only after the individual nominated makes application to the Court to be appointed. If the Court decides 1) that the Will is valid; and 2) the nominated individual qualifies, then the Court appoints them as the personal representative in a document referred to as “Letters”.
Once appointed, the personal representative is in charge (under Court supervision) of the probate estate. The probate estate only consists of assets which were in the deceased person’s name only at the time of his/her death and had no valid beneficiary designation. So, a personal representative has no authority over assets which 1) were joint with another person who survives; 2) have valid beneficiary designations (i.e., Pay on Death, Transfer on Death, or beneficiary); and 3) are in the name of a trust. (Remember, I said I wasn’t going to get too technical. There are always exceptions.) Since most people don’t want the Court involved in their estate at death, many times the person nominated as personal representative has no job.
A “trust” on the other hand is (again without getting too technical) a way of owning assets. Think of it like an entity. The person (or corporation) in charge of, or in control of, a trust is called the trustee. Many times the personal representative and trustee are the same person, but they are wearing different hats for legal purposes. So when you go to the bank and want to set up an estate account, you will need to prove you really are the personal representative appointed by the Court by producing a certified copy of the “Letters”. If you are setting up a trust account, then you have to prove you are the trustee by providing a copy of the trust documents naming you and any proof that may be necessary that those who were named before you are no longer willing/able to be the trustee.
If you’d like some help navigating your role as a personal representative and/or trustee, give Cripps & Simmons a call. We don’t just write documents – we are available to help with the administration as well.