Trusts are legal agreements that can offer flexibility for the ownership of some assets, allowing you and your successors to accomplish a variety of important personal goals that are impossible to accomplish in any other way.
What is a Trust?
Trusts are legal agreements that can offer flexibility for the ownership of some assets, allowing you and your successors to accomplish a variety of important personal goals that are impossible to accomplish in any other way. The keeping of property by a trustee—who may be one or more people, a corporate trust business, or a bank—in accordance with the terms of a written trust instrument for the benefit of one or more parties known as beneficiaries is referred to as a trust. The beneficiaries are the equitable owners of the trust property, while the trustee is its legal owner. A single trust might have more than one beneficiary or trustee.
A testamentary trust is one established by a will, and your will contains the trust terms for such a trust. A living trust, also known as an inter vivos trust, is one that is established during the grantor’s lifetime. The trust terms are detailed in the trust agreement or declaration. In contrast to your will or state law default rules, the terms of a living trust or inter vivos trust often govern what happens to the property in the trust after your death.
A trust established during the settlor’s lifetime may be revocable, meaning the settlor can alter it, or irrevocable, meaning the settlor cannot change it. With the least of interference from the probate (surrogate or orphan’s court), a trust may be created to achieve the goals of property management, aid to the settlor in the case of physical or mental incapacity, and disposition of property following the settlor’s death.
Trusts are not just for affluent people. Many young parents with few assets decide to establish trusts for the benefit of their children during their lifetimes or in their wills in case both parents pass away before all of their children reach an age the parents judge to suggest appropriate maturity to handle property (which often is older than the age of majority under state law). Trusts allow the trust’s assets to be held collectively.
Trusts allow the assets to be retained as a single, undivided fund that may be used for each child’s maintenance and education in accordance with their individual requirements, with the trust eventually being divided among the children after the youngest has reached a certain age. This kind of arrangement has a clear benefit over a rigid divide of property among children of different ages without consideration of their maturity level or specific requirements at the time of such distribution.