Updated: December 22, 2022
A trust is another way to leave your estate to your beneficiaries. A trust is a fiduciary (financial) relationship in which you, as the trustmaker or creator (called the “grantor” or “settlor“), give a trustee, who could be you or another person, the right to hold title to and manage your property or assets for the benefit of a third party, the beneficiaries (those who may benefit under the trust).
It may seem that trusts primarily benefit those who are very wealthy and are trying to avoid federal estate taxes and that the 99.9% who are less wealthy and do not have to worry about federal estate taxes don’t need to consider trusts, but trusts can be used for many reasons other than avoiding federal estate taxes.
It can be difficult to keep the various trust options straight. There are a number of ways to look at and compare the different trust choices to help you determine which is best for your situation.
One confusing aspect of trusts is that the name chosen for your trust does not necessarily describe the features and may be an abbreviated version. For example:
Some options presented as types of trust are frequently a combination of the features that you chose for your trust.
If you create a living trust and can fund it, you have three choices to make.
Additional features to consider.
If you create a trust, unless otherwise specified only you can change it. Therefore:
A family trust is merely a description of any trust going exclusively to family (related by blood, marriage, or law [in the case of adoption] and not a type of trust.
A family trust is merely a description of any trust going exclusively to family (related by blood, marriage, or law [in the case of adoption]) and not a type of trust.
Whatever the type of trust or name given to it, your trust is the sum of all the terms, provisions, and other features it contains. Instead of trying to determine what type of trust you want, determine what features you want the trust or trusts to have.
It may be best to think of creating a trust like going through a menu. For example, if you are creating a trust because you are ill and have two adult children with their own children, who are approaching college age, and a disabled spouse, you will be creating a Family Trust since only relatives are included.
The last things to consider are time, cost, and results.