What is a Trust?
You’ve probably heard the terms like Trust Fund or Trust account thrown around – or maybe my house and money is in a trust. So what the heck is a Trust and where is it?
Let’s break it down. A trust is actually an agreement. There are three main players in a Trust that make the agreement. The first is the person who sets up the trust. This person can be called a trustor, a grantor or a settlor. It’s all the same name and the terms are used pretty interchangeably. Next, is the Trustee. This is the guy or gal who agrees to manage the trust assets – or the stuff in the trust – for the third group of people, called the beneficiaries. It’s a little confusing though, because you can be all three of the main players, so you can be the one who set up the trust, manages the trust, and benefits from the trust
There are several different types of trusts, all which you would establish for different purposes and goals. The two most common are revocable and irrevocable. As the name suggests, a revocable Trust allows you to revoke the trust – that is end it. You can also amend or change it and really do anything you like with it, so long as it is legal. The second is an irrevocable trust, and on the other end of the spectrum, cannot be changed.
There are also special needs trusts, creditor protection trusts, tax saving trust, even oral trusts. Say for example, your mother asks you to hold money for the benefit of your minor child. Your mother just set up an oral – or constructive – trust for the benefit of your kid, you being the trustee.
There are huge benefits to a trust, I myself have one established, but in some cases, they are just not necessary.Whether you need one for your own planning should be discussed with you and your attorney.