Trusts are legal arrangements that can provide incredible flexibility for the ownership of certain assets, thereby enabling you and your heirs to achieve a number of significant personal goals that cannot be achieved otherwise. Trusts are NOT only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by the parents to indicate sufficient maturity to handle property (which often is older than the age of majority under state law).
The term trust describes the holding of property by a trustee, which may be one or more persons or a corporate trust company or bank, in accordance with the provisions of a contract, the written trust instrument, for the benefit of one or more persons called beneficiaries. The trustee is the legal owner of the trust property, and the beneficiaries are the equitable owners of the trust property. A person may be both a trustee and a beneficiary of the same trust.
If you create a trust, you are described as the trust's grantor or settlor. A trust created by a will is called a testamentary trust, and the trust provisions for such a trust are contained in your will. A trust created during your lifetime is called a living trust or an inter vivos trust, and the trust provisions are contained in the trust agreement or declaration. The provisions of a living trust or inter vivos trust (rather than your will or state law default rules) usually will determine what happens to the property in the trust upon your death.
A trust created during lifetime may be revocable, which means it may be revoked or changed by the settlor, or irrevocable, which means it cannot be revoked or changed by the settlor. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust with the least involvement possible by the probate (surrogate or orphan’s) court.
Trusts permit the trust assets to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.