A trust is a legal relationship where one person hold property for the benefit of another. In a trust situation, a trust creator, or settlor, transfers some or all of his or her property to a trustee who holds that property for the settlor’s or other beneficiaries’ benefit. The trustee receives legal title to the transferred property but with the obligation to manage it for the beneficiaries. The trustee may be formally compensated but cannot engage in self-dealing.
The written document that formalizes the trust relationship is normally referred to as a trust, itself, although trusts do not have to be reduced to writing. However, in the absence of a writing, problems with proof are compounded as with contracts, so every trust should be memorialized in a written document.
A popular alternative to the Will is the Living Trust. A Living Trust is similar to a Will in that it can be used to distribute property to a person’s heirs upon his or her death. It can be advantageous to certain individuals with more wealth as it can help minimize estate taxes. Additionally, if drafted properly, it will avoid the necessity of probate proceedings which is necessary upon the death of an individual with a Will only. The disadvantage of a Living Trust is that it can be complex and if not drafted properly, it can become burdensome for the surviving family members. It is therefore essential that one consult with a qualified estate planner to determine the need for a will or a trust.
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