What is a Trust?

A trust is a written document that creates a relationship between persons.

The grantor or settlor is the person who creates the trust.

The trustee is named therein to manage and safeguard the assets placed into the trust for the benefit of someone normally called a beneficiary. Some trusts expressly grant only the right to take income for life and others allow income and distributions to from the assets to occur.

The terms of the trust are set forth in the document.

In addition to appointing the trustee and naming the beneficiary, it should establish what the assets can be used for and when they may be distributed.

The trustee is a fiduciary who must follow the trust terms to manage the assets according to the trust’s terms and only distribute them when and how specified therein. Anything other than that could be a breach of duty owed to the beneficiary and could subject the trustee to a court case.

Additionally, the trust terms dictate what powers the trustee has in managing the assets etc.

State of federal law may change or supplement some of the terms of the trust.

For example, the terms of an old trust might violate current law if it stated that distribution could never occur to any of the grantor’s children if they married someone of a religion different than that of the grantor.

Federal and state laws today would deem such a prohibition as unconstitutional and that portion of the trust (and perhaps the entire document) might be struck down.

Trusts drafted today are often detailed lengthy documents.

  • Is the trust being created while you are alive or after you die?
  • Does the Trustee have the ability to alter or amend the trust for good cause shown?

The terms and type of trustee chosen can also change depending on the reason the trust is being created.

There are many reasons why a grantor would establish a trust.

Some include to minimize taxes, to take care of a minor child or disabled child, and in a second marriage to allow the grantor’s second spouse to receive income for life while distributing the assets to the grantor’s children upon the surviving spouses’ death.

Additionally, the type of trust and purposes for which it was created will change the terms for distributions.

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As you can see the are numerous considerations all of which must be examined when creating a trust which should only be undertaken by an experienced estate planning attorney.

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