A trust, like a will, is a vehicle used to manage and dispose of your assets when you die.  A trust, however, is better defined as a relationship.  It is created when one party (a settlor) transfers property to another party (the trustee) who manages and distributes the property for the benefit of another named party (the beneficiary).

A trust can created during the life of the settlor (an inter vivos trust) or at the settler’s death, either under a will or an independent trust instrument (a testamentary trust).

Basic Types of Trusts

Irrevocable – an irrevocable trust cannot be amended or revoked by the settlor under any circumstances plus the settlor no longer has any authority to withdraw the property that he or she has contributed.

Revocable- a revocable trust can be amended or revoked by the settlor at any time, and the settlor may simply revert back to owning the trust assets in his or her own name, any assets held in a revocable trust continue to be treated as if they are still owned by the settlor outright

Each subject to different concerns for income, gift, and estate taxes.

Why Have A Trust

A few reasons:

• To address property distribution among members of blended families
• To designate a third party to make investment, management, and distribution decisions for beneficiaries under a certain age, for beneficiaries with spending or creditor issues, for beneficiaries with capacity issues, and for beneficiaries with negatively influential spouses or marital issues
• To centralize management of real property (such as a vacation house, farm or ranch, and minerals or property outside of Texas)
• To designate the beneficiary of any assets that may remain after the initial beneficiary’s death
• To provide for ongoing charitable gifts
• To preserve a lineal distribution of assets
• To give someone full authority to manage your assets in the event of incapacity

A trust must be properly maintained for the rest of your life. It requires initial detailed work and ongoing management. You must remember that you have a living trust and that all of your assets should be owned by the trust. If you purchase property, you must purchase it in the name of the trust. If you inherit property, you must transfer it to the trust. When you open a bank account, you must make sure the trust is the official owner of the account. Keeping up with this detail is a necessity because the benefits of a trust apply only to the assets actually in the trust.