What is a Trust?

Provide for you and your loved ones in the event of sickness or disability;

Care for your family after your death;

Provide management expertise for business or investments; Achieve tax savings;

Protect your assets from creditors, or divorce actions;

Manage business or other assets;

Protect children or other heirs by managing assets for their benefit;

Minimize or avoid probate

A trust is a legal document, which is prepared by an attorney. It is a contract between the grantor, who establishes the trust, and the trustee, who administers the trust. The assets get transferred to the trust. It is administered for its duration, and when the trust fulfills its primary function, the money and assets are distributed, and the trust is terminated.

Every trust requires that it contain five parts: Grantor

Trust Property

Trustee

Beneficiary(ies)

Intent/Purpose

Grantor-This is the person who transfers the trust property to the trust. The grantor is also known as a trustor, settlor, or donor. The grantor must be the owner of the property which gets transferred to the trust. Some trusts permit the trustee to accept contributions from people other than the grantor. The grantor must also be legally competent, and have the legal capacity to sign the trust agreement, and to transfer the assets to the trust.

Trust Property-This is the principal of the trust. When property gets transferred to the trust, it is known as a "funded" trust. An example of this type of trust would be one that contains an insurance policy. An "unfounded" trust, is also known as a "standby" trust. The trust is formed, but the assets get placed in it later. A trust formed under a will does not need to be funded until a later date. Assets can be transferred to a trust during one's lifetime, by power of appointment, by will, or by gift.

Trust property can be in the form of cash, securities, life insurance policies, real estate, and even personal property. With the transfer of real estate and personal property, deeds and bills of sales are required respectively.

Trustee-This is the person who is responsible for managing and administering the trust. The most important requirement of a trustee, is that they be legally competent to accept the trust property which they are about to manage. Therefore, a minor child, or an incompetent person is not suitable and cannot serve as trustee. When the grantor establishes the trust, he usually names the trustee, and a successor trustee, who steps in to serve in the event that the trustee cannot.

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