What is a Trust?
A trust is a fiduciary relationship in which a third party (the trustee) holds the title to property (the trust estate or trust property) for the benefit of another (the beneficiary).
Common Types of Trusts
Revocable Trust (Living Trusts)
A Revocable Living Trust is a legal document that is created by an individual, called the grantor, to hold and own the grantor’s assets. It states provisions to dispose of these assets at death and names a Trustee to administer the assets. Revocable Trusts can be revoked or amended.
Irrevocable Trust
A Trust that cannot be changed that outlines the terms, appoints a trustee, and chooses the beneficiary. The trustee named in the trust document is responsible for managing the assets in the best interests of the beneficiary and carrying out the wishes of the grantor. Irrevocable trusts are typically used for the tax benefits they provide by permanently removing assets from one’s estate.
Charitable Trust
An irrevocable trust established to benefit a charitable organization and their non-charitable interests. These are typically called a Charitable Lead Trust and a Charitable Remainder Trust. With a Charitable Lead Trust, a charity is named as the income beneficiary for a fixed number of years, after which the remainder of the assets pass to non-charitable beneficiaries. A Charitable Remainder Trust provides current income to the non-charitable beneficiaries, usually the grantor, for life or a term of years. At the time of termination, the assets are distributed to one or more charities.
Supplemental Needs Trust
An irrevocable trust established to provide supplemental funds to a disabled person in a manner that does not jeopardize his or her access to governmental rehabilitation or support programs. Ordinarily when a person is receiving government benefits, an inheritance, gift, or even receipt of a sum of money for damages in a personal injury lawsuit could reduce or eliminate the person’s eligibility for such benefits.
Trust Under Will
A Testamentary Trust (sometimes referred to as a Will Trust or Trust Under Will) is a Trust which arises upon the death of the person who makes the will and which is specified in his or her will. A will may contain more than one testamentary trust, and may address all or any portion of the estate.
ESL can act in the capacity of a Trustee or Co-Trustee for Testamentary Trusts.
Beneficiary
A person or organization entitled to any income or principal of an estate, trust, or other contract, such as a life insurance policy or retirement plan. Beneficiaries can have present interests or future interests. An “income beneficiary” is a person presently entitled to some or all of the income of a trust. A “remainderman” is a beneficiary entitled to the balance of a trust fund only after another beneficiary has died or the trust is otherwise terminated.
Grantor
The individual who creates a trust and is generally the owner of the assets initially contributed to the trust. The grantor typically establishes the terms and provisions of the trust relationship between the grantor, trustee, and beneficiary. Also known as settlor, creator, or trustor.
To learn more about Trusts and ESL Trust Services, call our team at 585.336.1300.