What is a Trust?
Trusts of various types are used today for guardianship avoidance, probate avoidance, tax planning, asset protection planning, estate and gift planning, special needs planning for disabled family members, elder plan and Medicaid planning for nursing home assistance, and for charitable giving.
A trust is a legally recognized private agreement which allows an adult to manage, own and transfer property for their own benefit, or for the benefit of others.
Common to all trusts are (i) the person who creates the trust, often called the trustor or settlor, (ii) person who serves in the fiduciary capacity of trustee, who manages, of record legally owns, and who may ultimately distribute the trust property, and (iii) the beneficiary or beneficiaries who are designed to be better off by virtue of the creation of the trust with the trust property held by the trustee.
A trust without any property is called a “dry trust” and can be legally declared invalid. This is rare. Most trusts are created with at least nominal trust property. For example, $10.00 contributed to a trust would be sufficient trust property for a valid trust. A revocable living trust, common in estate planning, often contains investment assets, cash accounts, interests in closing held businesses, and certain real property.
Trusts are not new, but they are pretty much restricted to English and American property and contract law concepts. Trusts were once referred to as “uses,” suggesting that the trust property was going to be put to a particular use by the trustee for the benefit of the beneficiaries, as legally directed in writing by the trustor or settlor who created the trust. Trusts began in England as a means of minimizing taxes due to the crown upon the transfer of title to real property, and as a safeguard against “forfeiture of the blood” if your royal politics weren’t right and you were convicted of treason. Prosecutors, appointed by the King, not surprisingly expected a 100% conviction rate in treason cases.
The answers for you aren’t all in a mail order box kit or on an internet program. Know your legal rights about the use and availability of trusts to meet you and your family’s needs and goals.