A trust is a legal arrangement by which a person (the “Trustee”) legally owns the property of one person (the “Grantor”) for the benefit of another person (the “Beneficiary”).

What Does That Mean?

It’s easier to explain by using a common, simple example like this:

Bonnie has a six-year-old son, Alex. Bonnie wants to make sure that when she dies, her money goes to Alex, but of course it would be undesirable to leave large amounts of money to a young child. She would rather have her brother, Tom, manage the money for Alex. That’s where a trust comes in. A trust enables Bonnie to leave money for the benefit of her son without the money going directly to him while he is still a child.

Bonnie’s Last Will and Testament (“Will”) could say something like this:

“I give and bequeath to my Trustee, my brother Tom, the sum of X dollars, to be held, administered and disposed of as follows. My Trustee is authorized to pay from time to time so much of the income and principal of the trust as may be advisable, in my Trustee’s discretion, for the health, education, maintenance and support of my son, Alex. When my son reaches the age of 25 years, my Trustee shall distribute the entire balance of the trust to my son.”

In this example, the Trustee will be legally obligated to safeguard and invest the trust property until Alex is 25 years old. During that time, the Trustee will also decide when and how much of the trust to spend for Alex’s health, education, maintenance and support. When Alex turns 25 years old, the Trustee will pay to Alex whatever property remains in the trust and the trust will end.

Of course, this is just one simple example. There are many different types of trusts for many different purposes.

Excerpt from the book Estate Planning for the Savvy Client: What You Need to Know Before You Meet With Your Lawyer by Mary L. Barrow, Esq.

Copyright ©2020, 2017 by Mary L. Barrow

THIS EXCERPT IS A BRIEF SUMMARY FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR THE ADVICE OF COMPETENT LEGAL COUNSEL FROM AN ATTORNEY ADMITTED OR AUTHORIZED TO PRACTICE LAW IN YOUR JURISDICTION. YOU SHOULD ALWAYS CONSULT YOUR ATTORNEY BEFORE IMPLEMENTING OR CHANGING ANY ESTATE PLANNING STRATEGY.