What is a trust? It is an entity – not a person or thing you can touch – which is created to hold assets and which bypasses the probate process. It needs to be funded, that is assets need to be transferred to the trust, for the trust to fulfill this goal.
The execution of a trust creates a powerful relationship between a grantor (the person who creates the trust), the trustee (the person who manages the trust assets), and the beneficiary (the person who benefits from the trust assets.) Sometimes, one person wears all of these hats. This is most common in a revocable trust created during your lifetime, which is one type of trust. The relationship between the trustee and beneficiary is very important. The trustee is a fiduciary who is held to a high legal standard and often has discretion as to distribution of trust assets.
A trust is a great component of an estate plan—but is it the right document for you? The positive side of creating a revocable trust is that you maintain control over your assets and you are the one who determines what, how, to whom, and when assets are distributed.
There are many types of trusts, including the revocable (may be changed or terminated) trust as well as an irrevocable (non-changeable) trust. Tax consequences must always be considered when you transfer property. An experienced estate planning attorney will guide you and help you determine whether a trust is right for you.