Trusts are estate-planning tools that can help you manage property during life while ensuring a smooth transition of affairs after death. The Trusts section of FindLaw's Estate Planning Center includes practical information on different types of trusts including living trusts and charitable trusts. You'll also find useful guidance on how to set up a living trust, choosing a trustee, tax implications of trusts, when it makes sense to hire an attorney and related issues.
Types of Trusts
There are many different kinds of trusts possible, though all trusts can be separated into two groups; revocable and irrevocable trusts. The key difference, that one can be revoked and the other cannot, is apparent in their names, though the reasons for selecting one or another has more to do with other details about ownership and control.
A revocable trust, often called a "living trust," are trusts in which the person making the trust transfers their title of property into the Trust, serves as the initial Trustee, and has the ability to remove, change, modify, alter, or entirely revoke the trust during their lifetime. Trusts of this sort are useful because the trust owns the property, rather than the person making the trust. As such, when the person dies the property held in trust is not subject to probate. An irrevocable trust, by contrast, is one that cannot be altered, changed, modified, or revoked once it has been created.
Revocable trusts may be vulnerable to claims by the creator's creditors. To access these assets the creditor will need to petition the court for an order enabling them to access the assets of the trust, but the control the trust maker maintains in trusts of this kind is precisely what makes the assets vulnerable to creditors. Upon death a revocable trust becomes irrevocable.
There are many kinds of revocable and irrevocable trusts. We detail many of the trust types and their characteristics elsewhere in this section.
Setting up a Trust
Trusts, regardless of their type, have some common features. A trust is a transfer of legal ownership of property or assets from the property owner, called the trustor, to a person or institution responsible for handling the property, called a trustee. This property is held for the benefit of a third party, called the beneficiary.
A trustee is often compensated for their management of the trust. Regardless of whether they are paid the trust creates a "fiduciary" relationship between the trustee and the beneficiary, meaning that they can only act in the interests of the beneficiary. The grantor may act as trustee, but they still have the fiduciary duty. The grantor may also be the beneficiary of a trust, or among several beneficiaries. The obligations created by these different roles are important to consider when establishing a trust.
Many factors can influence the procedure for setting up a trust, including the age, size of the estate, and the marital status of the trustor. We provide information on choosing a trustee, amending an existing trust, as well as why a trust might be useful and how a trust ends.