What is a Trust and What is Included?
First we want to know, what is a Trust? A Trust is a legal document used in estate planning. Trusts create a legal relationship between a Grantor (the person who holds title to the property) and a Trustee (the person in charge of the Trust property). The grantor transfers property to the Trustee, who then manages and invests the property for the benefit of the beneficiaries.
There are two occasions when a Trust can be created: while you are alive or after your death. A living trust is created during your lifetime by a written document signed by you (as the grantor) and your Trustee. A testamentary trust is created within the provisions of your Will so that it does not take effect until your death.
Who can serve as your Trustee? Anyone who is 18 years of age or older and is of sound mind may be appointed as your Trustee. A business entity may also serve as Trustee if they are doing business in Indiana and have Trust powers as authorized by the state of Indiana. You can also have more than one Trustee (whether more than one individual or an individual and a corporate entity) that may serve as Co-Trustees.
Now, you may be wondering, if you (the grantor) create a Trust during your lifetime, does this mean you give up all control over the Trust property? The short answer is not necessarily. The Trustee, who may also be the grantor, has control over the Trust. However, this is subject to any rights retained by the grantor.
For example, depending on the provisions of the Trust, the grantor may retain the right to withdraw income and any amounts of principal upon request. The grantor may also keep the right to change or revoke the Trust. In addition, the grantor may preserve the right to direct the Trustee as to how he or she invests Trust funds. In fact, you can serve as your own Trustee in most cases.
What kind of things should be included in your Trust? The Trust at a minimum should do the following:
Name the Trustee(s) and successor Trustee
Decide who is to receive the Trust income, in what proportion, and for how long
Determine when, to what extent, and for what purpose the Trustee may distribute the Trust property
Stipulate when the Trust will terminate
Name who will receive the Trust property when it is terminated
List the duties and powers of the Trustee
(For Living Trusts) State whether it is revocable or irrevocable
For a further discussion on Trusts, check out Advantages and Dangers of Having a Trust, Types of Trusts, and Do You Need a Will and a Trust?