For some people, one or more trusts may be an important part of an estate plan.

Lot’s of people use the term “Trust” without really knowing what it is.   In general, a trust is created when property is held by one party for the benefit of another.  There are many types of trusts, used both in estate plans and for other purposes.

The creation of a trust relies on the idea that there are two interests in property:  one the legal ownership of the property, and the other the beneficial or equitable ownership of the property.   Without a trust, those parts of the ownership are merged and one person “owns” the property.  With a trust, those two interests are divided between the Trustee, who holds legal title to the property, and the Beneficiary, who holds equitable (or beneficial) title.  Although the Beneficiary is entitled to the use and benefit of the asset, the Trustee holds the legal title and controls the property according to the terms of the trust document.

The Major Characters In a Trust are as Follows:

Grantor:  The person who supplies the property for the trust.  AKA:  “Settlor” or “Trustor”
Beneficiary:  the one for whose benefit the trust is created
Trustee:  one who holds legal title to property “in trust” for the benefit of another person, and who is required to carry out specific duties with regard to the property, or who has been given power affecting the disposition of property for another’s benefit.

A trust is either “Inter Vivos” (created during the Grantor’s lifetime—also known as a “Living Trust”) or “Testamentary” (created in a will--does not exist until after the Grantor’s death).

A trust may also be “Revocable” (which may be terminated at the Grantor’s discretion) or “Irrevocable” (which the Grantor has no power to terminate).

Once these designations are determined, trusts may be classified by their purpose (Such as an “Intervivos Irrevocable Life Insurance Trust”).  In estate planning, specific trusts may be used for many purposes, but the one most often advertised, requested and discussed for moderate estates is the Revocable Intervivos Trust (“Living Trust”).