A trust is a document between the settler and the trustee with instructions for your property that is in trust for your beneficiaries. Objectives for trusts are usually to reduce estate tax liability, protect property and to avoid probate or estate litigation.
An owner placing property into a trust turns over part of his or her property ownership to the trustee, separating the property's legal ownership and control from its equitable ownership and benefits. This simple act significantly transforms the property into one which is often immune from estate taxes, is resistant to probate, and has many other benefits.
Today, the trust is widely considered to be the most innovative contribution to the English legal system and plays a significant role in most common law systems. Although trusts are often associated with estate planning “they have become very important in American capital markets, particularly through pension funds (essentially always trusts) and mutual funds (often trusts).”1
To set up a trust you need:
- Settlor (or trustor or grantor)
- Objective of the trust (there are different types of trusts to achieve specific objectives)
- A specific trust (as mentioned above)
- Beneficiary (someone who will benefit from your property)
- Trustee (the person in charge of the trust – someone who understands the rules and can properly manage the trust)
Caverly, N. B. and Simon, J. S. (n.d.) What is a trust? [For Dummies]. Retrieved from http://www.dummies.com/how-to/content/what-is-a-trust.html