When you think of the word “trust” it may conjure up images
of standing on the edge of a table, hands across your chest, as you fall
backward into the arms of your buddies.
But when it comes to estate planning, a “trust” is something entirely
A trust is a mechanism used in estate planning to protect
and distribute your assets. It can be
used during your lifetime and/or after your death. Think of a trust as a sort of “pot” in which
you place your assets. You establish the
rules about what is to be done with the assets in the pot. You also put someone in charge of caring for
and distributing those assets. There are
several components of a trust:
Settlor or Grantor:
This is the person who sets up the trust.
Trust property: This
is the property that goes into the imaginary “pot.” Trust property is titled in the name of the
trust and is referred to as being “held in trust.” It is also known as the “corpus” of the
Trustee: A trust is
managed and overseen by the trustee.
This person makes sure the trust property is cared for and distributed
according to the rules of the trust.
Beneficiary: A person who receives a benefit or distribution
from a trust is know as a beneficiary (or beneficiaries if there is more than
Trusts come in many different varieties and are established
for a multitude of purposes. For
example, some trusts are established to hold assets for minor children until
they reach a certain age. Some are
established to take full advantage of any federal estate tax exemption for a
spouse. A special needs trust holds
assets for disabled individuals. Special
needs trusts are often essential to enable a disabled person to receive money
without impeding his/her ability to qualify for public benefits.
Different types of trusts are required to comply with
different rules, and state laws vary significantly in this area. So you should consult with an
attorney when considering making a trust part of your estate plan.