Trusts

Answers from our Attorneys

What is a Trust?

A trust is the organization of property by a person or incorporated entity solely for the benefit of another person. Created by a trustor, the trust entitles a chosen portion of assets and property to be managed by a trustee(s). Unlike in a will, the trustees become the legal owners of the property and assets managed by the trust, and agree to continue to manage these assets for the good of the "beneficial" owners of the trust.

A trust document is dissimilar to a will and more akin to a deed. While trusts are used for everything from pensions to complex business arrangements, one of the most common applications is used in wills and estate planning. The trustee often becomes the executor of the will upon the death of the trustor.

Types of Trusts

Revocable Living Trust This is a trust that is established during the life of the settlor and can be nullified at any time by the settlor. As with the Estate Freeze Trust and the Limited Term Trust, the Revocable Living Trust is becoming an increasingly common trust used by estate planners mainly to avoid probate. However, the ability of Revocable trusts to avoid probate is reliant on proper drafting of the document and the transference of all property to care of the trust before the time of death.

Special Needs Trusts: A trust that provide benefits protect the assets of, physically disabled or mentally disabled persons and still allow such persons to be qualified for and receive governmental health care benefits, especially long-term nursing care benefits, under the Medicaid welfare program. Supplemental or Special Needs Trusts are frequently used to receive an inheritance or personal injury litigation proceeds on behalf of a disabled person in order to allow the person to qualify for Medicaid benefits.

Limited Term Trust: This particular trust is created to last a specific number of years, with the assets held by the trust returned to the settlor at the end of that time. This type of trust is often used for retirement planning purposes.

Estate Freeze Trust The Estate Freeze Trust is created to help avoid estate taxation on a particular asset or group of assets that are expected to increase in value over time.