A trust (a collection of assets) is a legal agreement through which funds or assets are held by a third party (the trustee) on behalf of a beneficiary. It is often considered an alternative to a will.
The one major benefit from a trust is that the assets can be passed to beneficiaries without using probate which saves time and money.
There are three main pieces in a trust:
- Trustor (Trustmaker)—the person who creates the agreement and transfers ownership of certain assets to the trust. Also called grantor or settlor.
- Trustee –The person responsible for managing the trust (the property or assets the trustor gives them to keep and are titled in the agreement.)
- Beneficiary (or Beneficiaries)—The people who receive the benefits of the trust agreement.
There are several types of trusts, but two of the common ones are a living revocable trust and a living irrevocable trust.
A Living Revocable Trust allows you to retain control of the assets during your (the trustor’s) lifetime. It is designed to allow for easy transfer of the trust creator’s assets to beneficiaries and avoiding the expensive legal process of probate. Assets in a trust are private, as opposed to probate where assets become public. A Revocable Trust can be changed during a person’s lifetime, while an Irrevocable Trust cannot. Setting up a trust should be done by a professional.