In its most basic terms, a “Trust” is a legal structure in which a person or entity (the “Trustee”) holds property for another (the “Beneficiary”). A Trust is a creature of state law – each state has different laws – so the “domicile” of the Trust is very important to determine the law of which state applies.
The person who creates the Trust is called the “Grantor” or “Settlor”.
Lifetime (intervivos) Trusts can be “revocable” or “irrevocable”. Revocable Trusts, as the name implies, can be revoked (reversed) until the Grantor dies, at which time they become irrevocable. Irrevocable Trusts cannot be modified. Under the tax law, trusts are either “simple” or “complex”. A simple Trust requires the Trustee to distribute all trust income for each year to the beneficiary or beneficiaries. A complex Trust allows the Trustee discretion whether or not to distribute that year’s Trust income.
There are many different types of Trusts, which are used for many different purposes. With appropriate drafting, Trust assets would not be “marital property” subject to division in the event of divorce. I like putting together a Trust that is created while the Grantor is alive with a “Pour-Over Will”, which transfers the remaining property a death to the already existing Trust. Trusts can be relatively simple documents or very complex with multiple, nested contingencies.
Trusts serve many useful purposes and can also be used very creatively with appropriate circumstances. Creative uses for Trust are discussed with clients.
I welcome you to contact me for a free consultation to discuss if creating a Trust is right for you.