Glossary

A trust is a legal arrangement where one party, known as the grantor or settlor, transfers property and assets to another party, known as the trustee, to be held and managed for the benefit of a third party, the beneficiary. 

The trust document outlines the terms and conditions of the trust, such as how the assets will be managed and distributed and whether they can be either revocable or irrevocable. 

A revocable trust can be changed or terminated by the grantor at any time during their lifetime, while an irrevocable trust cannot be changed or terminated without the consent of all beneficiaries. 

A trust can be used to:

• Ensure assets are distributed according to the wishes of the grantor, the person who created the trust.

• Help your assets avoid probate, the legal process of administering an estate after someone passes away.

• Manage and protect assets.

• Minimize taxes and more.

Trusts can be helpful for a wide range of individuals, depending on their specific financial and personal goals. 

Typically, trusts are recommended for those who:

• Have a blended family—If you have children from a previous relationship or marriage, a trust can help ensure that your assets are distributed fairly and according to your wishes.

• Have significant assets — If you have substantial assets, such as property, investments, or business interests, a trust can help you manage and protect those assets.

• Want  assets to bypass probate — Probate is the legal process that occurs after a person's death to distribute their assets. It can be time-consuming and expensive, but a trust can help your assets bypass probate and ensure they are distributed according to your wishes.

• Want to protect their assets A trust can help protect your assets from creditors, lawsuits, and other potential threats.

• Want to provide for their loved ones — A trust can be used to provide for them after your death, ensuring they have the financial resources they need to thrive.

Trusts can be a powerful tool for individuals looking to protect and manage their assets, provide for their loved ones, and achieve their financial and personal goals.

Several types of trusts are available, each serving a specific purpose. 

Read below to discover seven types of the most created trusts.

1. Revocable Trust — This type of trust can be amended or revoked during the grantor's lifetime. The grantor can also act as the trustee and manage the trust's assets.

2. Irrevocable Trust—Once created, an irrevocable trust cannot be amended or revoked. The grantor cannot act as the trustee, and the assets transferred to the trust are no longer considered part of the grantor's estate.

3. Testamentary Trust — This type of trust is created by a will and only goes into effect after the grantor's death. The trustee manages the assets and distributes them according to the grantor's wishes.

4. Living Trust — A living trust is created during the grantor's lifetime and can be either revocable or irrevocable. The trustee manages the assets while the grantor is alive and distributes them according to the grantor's wishes after death.

5. Charitable Trust — A charitable trust is a type of trust that benefits a charitable organization or purpose. The grantor can receive a tax deduction for creating a charitable trust.

6. Special Needs Trust — This type of trust is designed to provide for the needs of a person with disabilities without disqualifying them from receiving government benefits.

7. Asset Protection Trust—An asset protection trust is typically irrevocable and protects the grantor's assets from creditors and lawsuits.

The above trusts are just a few examples of the trusts available. Each trust type has its own benefits and drawbacks, so it's essential to consult an attorney to determine which type of trust is right for you and your unique situation.