Setting up a trust: Types and uses
Trusts are one way of transferring property to another person. Here we go over the different types of trusts and their uses.
- A trust is a provision of the law in which one party, a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. A trustee has the highest of legal obligations, to manage the trust and see that it's used only for the purposes established by the grantor.
Trusts can be living, meaning they were established during the grantor's lifetime, or testamentary, meaning they were established in a will. Most living trusts are revocable, meaning they're subject to termination or modification at any time by the grantor for any reason. For testamentary trusts, a deceased grantor can't exactly change the trust's terms. So these are always irrevocable.
Trusts are most commonly used by people with minor or young adult children who want their kids to benefit from the money and property they've accumulated in life. In a nutshell, a trust document can give the trustee the guidance and authority to do what the parents would do if they were alive. The trustee should be a person, or a bank, with good judgment and discretion.
Your lawyer can draft a trust document with almost any kind of conditions to guide, dictate, or limit the use of trust funds. But you are responsible for finding a party willing and competent enough to where the trustee hat.
Stay financially fit, friends.