What is a trust? It can be defined as a fiduciary relationship where one party (trustor) grants another party (trustee) the authority to claim the title to assets or properties for the interest of the third party (beneficiary). A trust provides a legal cover for the trustor’s properties by ensuring that the assets are distributed based on the will of the trustor. As a result, it helps to minimise paperwork, save on time, and reduce estate taxes.
Categories of trusts
There are several kinds of trusts that exist in the world today. However, the three major categories in which all of them fit are as described below:
- Living/Testamentary trust
A living trust refers to a written content whereby a person’s assets are given as a trust so that the individual can use and benefit from the assets throughout his life. When the person dies, the properties are then transferred to their beneficiaries by a trustee.
On the other hand, a testamentary trust is a type of trust that outlines how the individual’s assets are to be precisely designated after their death. It shows the ratio of dividing that assets including specific details on the kind of assets.
- Revocable and irrevocable trust
A revocable trust refers to a type of trust that can be terminated or changed by a trustor throughout his lifetime. The trustor has the chance to change beneficiaries or how the property is to be shared. They also have the right to terminate the trust if they want to.
On the contrary, an irrevocable trust refers to the kind of a trust that the trustor has no rights to change or terminate. Once an irrevocable trust is established, it cannot be altered in any way, and the beneficiaries will get the assets after the person’s death.
A living trust can either be revocable/irrevocable depending on the will of the trustor. However, a testamentary is only irrevocable.
- Funded or unfunded trust
A funded trust is that which the trustor puts assets in it throughout their life. It allows a trustor to add in more and more assets as they wish until their death.
An unfunded trust only entails the agreement with no means of funding. Unfunded trusts can transit to be funded upon the death of the trustor or still remain unfunded.
All types of trusts fall under the above mentioned three major categories depending on nature and purpose.
Where do I get a trust?
As an individual, you might want to obtain a trust, but you have no idea where to start. The good thing is that the internet has ensured you get quick information on anything you want and can even direct you on how and when to obtain a trust. A trust will guarantee a straightforward future for your beneficiaries and help to avoid the quarrels and tussles that may arise over properties.
As mentioned earlier, trusts involve three major parties, which include the trustor, trustee, and the beneficiary. It starts with a potential trustor approaching a trustee, which can be a firm or an individual, and informing them of their wish to obtain a trust. The trustee will then follow the steps that the individual needs to follow in order to obtain trust. The trustor is required to provide correct information with any omission or addition whatsoever. The trustee can then take an extra step to validate the truth of the information by dispatching a team to find out if the assets in question exist.