A trust is a centuries-old legal arrangement whereby money or property is owned and managed by one person (or organization) for the benefit of another.
A trust is created by a settlor, who entrusts some or all of his property to people of his choice (the trustees). The trustee is the legal owner of the trust property (“corpus”), but is obliged to hold the property for the benefit of one or more individuals or organizations (“beneficiary”) specified by the settlor. The trustee owes a fiduciary duty to the trust beneficiary, who is the "beneficial" owner of the trust corpus. The fiduciary standard is the highest legal, ethical and professional standard of conduct.
The trust is governed by the terms of the trust document, which is usually written, and is governed by local and state law. A trust can be created during a person's life (usually by a trust instrument) or after death (‘testamentary trust”) in a will.
Some of the benefits of using a trust include privacy protection, reducing the cost of probate (in some cases), lowering death taxes, asset protection and safeguarding assets for children. A note of caution: a revocable living trust is a popular form of trust and it can be beneficial in some situations, but for most folks it is an unnecessary and expensive planning action.
A trust is a flexible tool that can solve a number of planning problems, and we often recommend the use of various types of trusts in Wealthcare planning. Be sure to seek competent legal and wealth management advice to determine if a trust is an appropriate planning solution for you.
