Heirs, Beneficiaries, and Trustees – Part 2

In my last article, I defined “Heir”, “Beneficiary”, “Personal Representative”, and “Trustee.” These terms can be confusing in the abstract – often, using them in examples helps clarify what each means and how it fits into the context of an estate plan.

First, the facts for our examples: When George Jetson died he left behind a wife, Jane, a daughter, Judy, and a son, Elroy. George also had a maid, Rosie, and a dog, Astro. The value of his estate on the date of his death was $400,000, triggering a probate under both California and Oregon laws. The person appointed by the court to oversee and manage the probate is the Personal Representative.

In our first example, George dies intestate, that is, without leaving a document distributing his estate at his death. Under the laws of intestacy in both Oregon and California, Jane would be first in line to be appointed Personal Representative, with Judy following if Jane could not, or did not want to act. Because Elroy is under age 18, he does not qualify. George’s Heirs are his wife and children and they would receive his estate after the probate was complete.

Let’s say, however, that before his death, George writes a Will, naming his dear friend, Mr. Spacely, as his Personal Representative. In both California and Oregon, a person or entity named in a Will takes preference for appointment over any other person or entity, and Mr. Spacely would be named Personal Representative, unless there was some reason that would disqualify him. George’s Will leaves his entire estate to Rosie and Astro, making them his Beneficiaries. Barring a successful contest to the Will, they would take the estate over George’s Heirs (Jane, Judy, and Elroy – although Jane may be able to still receive some as the surviving spouse, a subject for another time!).

In our first two examples, a probate is required, and Jane must seek court authority before taking many of the actions needed in administering an estate. This adds both unnecessary time and expense to the administration of George’s estate.

In the last example, George centers his estate plan around a living Trust. George names Jane as his Trustee and leaves the Trust Estate to Jane and the kids, as well as some provisions for Rosie (to thank her for her years of service), making them all Beneficiaries. As Trustee, Jane has the same basic duties as a Personal Representative; however, she does not require court authority in order to act. The Trust also provides for Jane (as Trustee) to manage Elroy’s share until he is 25 and (hopefully) ready to manage the money wisely on his own (something not easily accomplished in a Will without writing a Trust into the Will).

Hopefully, putting these terms in contexts of examples help keep them straight. They have very specific meanings, rights, and duties – knowing the difference can go far in ensuring your plan is accurate and in sync with your needs and desires.