What is a Trust?
The trust agreement is a contract that formally expresses the understanding between the Grantor and Trustee. The trust agreement contains a set of instructions to describe how the trust property is to be held and invested, the purposes for which its benefits (such as income or principal) are to be used, and the duration of the agreement and the purpose of the agreement.
Who are the Parties to a Trust?
Every trust has the following three roles present:
- The Grantor is the person or persons that create the trust agreement.
- The Trustee is the person, persons, professional fiduciary, or trust company designated to administer the trust agreement.
- The Beneficiary is the person, persons, or charities designated to benefit from the existence of the trust agreement.
Types of Trusts?
The first consideration is whether the trust is revocable (meaning it can be changed or altered during the Grantor's lifetime) or irrevocable (meaning that the agreement may not be changed or canceled by the grantor during their lifetime). Both types are trusts may be used as part of estate planning. There are many purposes for Trusts that go beyond this brief description, but for estate planning, there are generally two types of trusts utilized:
Revocable Living trusts are created during the Grantor's lifetime, and they provide for the administration of property should the Grantor become incapacitated and most likely will also have provisions to transfer property to a new group of beneficiaries after the grantor's death. Property held in a revocable trust is not normally subject to probate (the court-supervised process to validate a will and transfer property on the death of the Grantor and oversee the repayment of creditors). In Florida, because such trust property is not subject to probate, it need not be disclosed in the court record, and confidentiality may be maintained.
Testamentary trusts are created as part of a Last Will and Testament and must conform to the statutory requirements that govern Wills. This type of trust becomes effective upon the death of the person making the will (the "decedent") and is commonly used to protect an inheritance for a minor child. The Will provides that part or all of the decedent's estate will be given to a Trustee charged with administering the trust for the purposes outlined.
The decision as to whether to utilize a trust agreement is complex, and you should consult with an attorney regarding your unique situation.
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