In the world of estate planning, terms that refer to legal documents such as wills, trusts, powers of attorney, and healthcare directives can be confusing and even overwhelming at times. What is a will, and how does it differ from a trust? What distinguishes a springing power of attorney from an immediate power of attorney? Or are they the same thing? No wonder estate planning can get so confusing!
The concept of trusts is another area within estate planning that can create a great deal of confusion for people unfamiliar with the law. In this article, we hope to clarify some of the different types so that, when you encounter them, you can avoid confusion and better determine which tools are appropriate for your situation and whether they are being used in your own estate planning.
A living trust is the most common type of trust that you will encounter in estate planning. Many individuals use a revocable living trust as their primary estate planning tool. You may also see living trusts referred to as inter vivos trusts; “inter vivos” is simply the Latin phrase for “between living persons.” A living trust is created during the trust maker’s lifetime rather than at death. To create a living trust, the trust maker enters into an agreement with a trustee that places the trustee under a legal obligation to use the money and property in the trust only for the benefit of beneficiaries named in a trust document, or “instrument,” signed by the trust maker. A trustee who fails to fulfill the terms of the agreement can be held liable for any damages suffered by the beneficiaries and can be removed as the trustee. Living trusts can be either revocable or irrevocable, and they can be designed in limitless ways, precisely customized to achieve the unique goals and objectives of the trust maker.
Another type of trust is a testamentary trust, which is created under the terms of a decedent’s last will and testament. A testamentary trust comes into being upon the testator’s (the person who created the will) death, because a will becomes effective only when the testator dies. For example, an individual’s last will and testament may instruct the executor of their estate to create a trust after the testator’s death for the specific purpose of receiving some of or all the property owned by the deceased testator’s estate. The will typically has provisions for naming a trustee and contains the terms of the trust, spelling out how the property in the trust will be used or distributed for the beneficiaries’ benefit. Because this type of trust is not created until the death of the trustmaker, it is referred to as a “testamentary” trust as it exists as a result of the trustmaker’s last will and testament.
Constructive trusts rarely have anything to do with estate planning or postdeath administration of an individual’s estate. In fact, a constructive trust is not actually a trust at all. Rather, it is an equitable remedy used by the courts to prevent someone from benefiting from property that has been wrongly obtained. In contrast to a living trust or a testamentary trust, no fiduciary relationship results when the court imposes a constructive trust as a judicial remedy. One might encounter the use of constructive trusts by a judge in a bankruptcy proceeding.
For example, if a debtor who was filing for bankruptcy transferred certain property to their cousin just days before filing but did not disclose that transfer of property to the bankruptcy court, the court could require that property to be held in a constructive trust for the benefit of the debtor’s creditors even though the property’s title may be in the cousin’s name. This action by the court would thereby prevent the cousin from being able to sell or use the property for their own benefit until it can be turned over to the creditors who had a claim on the debtor’s property.
Are These Trusts the Same?
As you can see, even though these three types of trusts all share certain terminology (i.e., the word “trust”), they can be very different in certain respects. And in the case of a constructive trust, they can have almost no relation whatsoever to the other types of trusts discussed above.
So why do our laws insist on using similar terminology to describe such different concepts? Unfortunately, in the law, tradition is a difficult thing to escape. Certain legal terminology has a long history of describing very particular legal concepts, and attempting to create new terminology for concepts known for centuries in the law can create even greater confusion and conflict in the courts. So we sometimes cling to these traditional terms despite the confusion they may cause to the layperson.
That is not to say that legal terminology can never change. It does happen. So, perhaps someday there will be more clarity when talking about the different types of trusts, but in the meantime, I hope we have been able to clarify at least one small corner of the legal world for you.
 Constructive Trust, Black’s Law Dictionary (8th ed. 2004).
An important element of creating an estate plan is choosing a responsible party to handle your legal, medical, and financial affairs if you become unable to manage them yourself (i.e., become incapacitated) or die. The individual or entity you choose must be someone whom you can trust to make crucial and often time-sensitive decisions, who is willing to be detail-oriented and transparent with those who have a right to know how your property is being managed and used, and who will be ethical and fair to all of those with an interest in your welfare and, ultimately, your property.
Most estate planning in the United States utilizes a combination of trusts, powers of attorney, wills, healthcare directives, and similar legal documents. Each of these documents designates a person or an entity to carry out certain legal duties as spelled out in the document (often referred to as fiduciary duties) for the person who creates and signs the document. These fiduciary roles have different names depending on the type of document that grants the authority, as summarized in the table below:
last will and testament
executor or personal representative
power of attorney
agent or attorney-in-fact
healthcare directive or healthcare power of attorney
healthcare agent or healthcare surrogate
Occasionally, an individual or a couple who is working with an attorney to establish their estate plan may ask whether a disabled individual can serve in any (or even in all) of these roles. The short answer is yes. In general, a disabled individual can serve in any of these fiduciary roles as long as their disability does not materially interfere with their ability to carry out the legal responsibilities and duties imposed on them by law.
Legal Requirements for Naming a Fiduciary
To help illustrate why this is generally true, we can examine the Uniform Trust Code (UTC), which is model legislation that has been adopted in some form by thirty-five states. Although these laws can vary on certain important points once adopted by the states, they are generally similar and provide us with guidance on the duties and responsibilities of a trustee across the country. Many of the states that have not adopted the UTC nevertheless have provisions in their trust and probate codes similar to those found in the UTC and Uniform Probate Code with respect to who can be named as a fiduciary.
The UTC does not establish a specific legal test for qualifying someone to serve as a trustee. The only requirement is that they accept the duties either in writing or by simply performing the duties of the trustee or otherwise indicating acceptance of the trusteeship. Thus, if an individual names a disabled person as their trustee in a UTC state, the named person would be perfectly within their rights to act in that capacity as long as they could accept the appointment in writing or begin acting in the role of a trustee by adequately carrying out their duties regardless of any disability that they might have.
In fact, if any state laws prohibited someone with a physical or mental disability from acting in a fiduciary role merely because they had the disability, that prohibition could easily run afoul of the Americans with Disabilities Act (ADA), which is federal legislation designed to prevent unjustifiable discrimination against individuals with disabilities.
But what if the named person does not in fact have the physical or mental ability to carry out their duties? In that case, the UTC does provide clear guidance, as it specifically addresses removing a trustee who has proven to be incapable of carrying out their responsibilities. Section 706 of the UTC provides that a trustee can be removed upon request of a co-trustee, grantor, beneficiary, or the court itself “because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively . . . .” Most states have laws similar to the UTC with respect to the nomination or removal of an individual in any fiduciary role that might be found in an estate plan.
From a practical perspective, if you understand the duties of a trustee or other fiduciary, and if you feel that the person you plan to nominate to serve in that capacity can responsibly carry out those duties, then you have every right to name that person to serve in that role regardless of their disability. For example, if your executor is a blind or deaf adult child, you should ask yourself whether their particular disability will seriously interfere with their ability to carry out their responsibilities in that role. If you are not sure what those responsibilities will be, ask your attorney to explain them. Once you better understand the role, then you will be better prepared to answer that question. If your preferred choice for trustee or executor has a disability that will in fact interfere with their ability to carry out their responsibilities, the next question to ask is whether they can obtain sufficient assistance through technology or other means to carry out their duties. If so, then they may still be the best choice.
The bottom line is that a disability in one area, such as blindness or a hearing impairment, may have very little impact on an individual’s ability to carry out the necessary duties of a fiduciary, particularly if they are able to obtain assistance to reduce any obstacles that might otherwise prevent them from fulfilling their role. In fact, failing to consider a trusted family member or professional simply because they have a disability could needlessly deprive you of the perfect choice for that crucial role of trust and stewardship that is so important to successfully carrying out your estate planning.
 See Trust Code, Enactment Map and Legislation, Unif. L. Comm’n, https://www.uniformlaws.org/committees/community-home?CommunityKey=193ff839-7955-4846-8f3c-ce 74ac23938d (last visited May 20, 2021).
 Unif. Tr. Code § 701(a) (Unif. L. Comm’n 2000) (amended 2005).
 28 C.F.R. § 35.130.