What exactly is a trust?

November 5, 2007

Here in the Memphis and Northern Mississippi area many people come to my offices wanting to create a trust account for their childen or loved ones but initially have little knowledge of what a trust actually is.  A trust is a separate legal entity from yourself that you allow to hold onto an asset for you before the trust one day distributes to the people that you have elected to benefit from the trust. Think of it much like you would a safe that you place assets in to one day be opened up and the contents distributed to your designated beneficiaries.  

A basic trust always has these four components: 

  • The Grantor – This is the person who creates the trust.
  • The Beneficiary(s) – Person who receives the benefits (income and/or principal) of the trust. The grantor can also be the beneficiary.
  • The Assets – These are the items, properties or policies transferred into the trust.
  • The Trustee – This is the person who manages the assets of the trust and distributes proceeds according to the guidelines set forth in the trust. The grantor can also serve as the trustee while he/she is alive. A trust can established while you are still living (the legal term for this is inter vivos) or it can be established upon your death by specific instructions made in your will (this is called a testamentary trust).

 A revocable trust is a trust that can be changed or revoked during by the grantor during his lifetime.  An irrevocable trust is a trust that cannot be changed or revoked after they are created.

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Posted by James Ferrell | Filed Under Blog, James K. Ferrell, trusts 

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