A trust is a vehicle for holding and transferring assets, such as cash, stock, or real estate. Three parties are involved in a trust:
- The grantor (or trustor) is the person who creates the trust.
- The trustee is the person or institution in charge of managing the trust’s assets according to the terms established by the grantor/trustor.
- The beneficiary is the person (or organization, such as a charity) that receives the assets in the trust. A trust can have more than one beneficiary.
When the grantor creates a trust, they’re able to attach terms and conditions that stipulate how the assets are used by the beneficiary/beneficiaries. For example, the grantor might instruct the trustee to distribute a certain amount of money per year to the beneficiary or stipulate that the funds may only be used to pay for education or another specific expense. The grantor can even require that the beneficiary be employed or engaged in other gainful activities to receive distributions from the trust.
Setting up a revocable trust (aka, a living trust) allows the grantor to retain control of the trust assets during their lifetime. They can change the terms and beneficiaries while they’re still alive, or dissolve the trust entirely should circumstances change.
Setting up an irrevocable trust takes the assets out of the grantor’s control. Once they set up the trust, they cannot change its terms or dissolve it. Typically, a revocable trust becomes irrevocable upon the death of the grantor.
There are different trust types designed for specific purposes, including marital trusts, charitable trusts, and life insurance trusts. Fidelity explains the basic types of trusts. For more information about each type and which trust is right for you, reach out to estate planning attorneys Robert Graham or Ryan Linn at 1-800-621-8585.
Ryan Linn (RLINN@GRAHAMLPA.COM)
Robert Graham (RPGRAHAM@GRAHAMLPA.COM)