What is a Trust?
The word "Trust" in the minds of many people suggests a complicated legal tool which can only benefit the very wealthy. In fact, a Trust can be a very simple device of significant benefit for many people in a wide variety of circumstances.
Actually, a Trust is created when legal title of one or more assets is held in the name of one or more individuals (or corporations) for the benefit of others. While a Trust may arise by an oral agreement in some cases, it is usually established by a formal "Trust Agreement", or by a person's Last Will and Testament. The use of a Trust in such circumstances can avoid the cost and time consumption required of a Court Guardianship or Conservatorship.
A Trust arrangement permits a Trustee to manage the financial affairs of one or more beneficiaries, so that the assets of persons who lack legal capacity or who may lack fiscal responsibility or expertise may be prudently managed. Further, a Trust funded during one's lifetime may be used to avoid probate, since assets are ultimately distributed in accordance with the terms of the Trust Agreement rather than a person's Last Will and Testament. Avoiding probate means minimizing many of the costs associated with it, as well as the time necessary to prepare and file required Probate Court papers. It also means that personal financial information can be kept private rather than placed on the public Court record. Further, a properly structured Trust, like a properly structured Will, can minimize estate taxes.
A Trust also can be used to permit flexibility in the discretionary use of assets of the Trust among a group of beneficiaries. Parents or grandparents, for example, can establish a Trust for the education of minors and provide that the Trustee may make future discretionary decisions as to expenses to be made for children's education, based upon the needs of the beneficiaries in circumstances where the children's parents have died. Trusts do require paying attention to the fact that a Trust is a separate legal entity which, in some cases, must pay taxes and certainly must account to beneficiaries. But persons who have young children, elderly parents, or family members who are not fully able to manage assets should at least consider the possibility of using a Trust approach to asset management.