When you hear of Trust and Types of Trust what comes to your mind? first you try to understand it from the common meaning of Trust that we have in our society and then you try to relate it to wealthy individuals, persons with high net worth. But it’s often not the case, Below we will examine Trust, what it is, its types, and the importance of Trust in estate planning in full detail.

What is A Trust

Trust is a legal instrument or device whereby a person called a Settlor delivers part or all of his properties to another person called Trustee who administers and manages the property/ies for the benefit of designated person/s called Beneficiaries. The term “person” may refer to an individual or natural person or a juridical person like a corporation.

It is a transaction usually composed of three parties (Settlor, Trustee, and Beneficiaries), each with his own obligations and rights, and involving properties and property interests to address various kinds of purposes.

The most notable feature of Trust is grounded in the fact that the legal title to the property is in one person while the beneficial interest which is referred to as the “equitable title” is in another person.

The legal right ownership and control are in the trustee, subject to the duty of applying and using the property as directed by the Settlor, while the right to enjoy the benefits from the property is in the beneficiary of the trust.


Types of Trust


  • Living Trust is a Trust created during a Settlor’s lifetime and which is expected to take effect during the lifetime of the Settlor.
  • Unlike a Will, which comes into play only after a person dies, one can start benefiting from the Living Trust while one is still alive. Hence, a Living Trust covers three aspects of a Settlor’s life: when the Settlor is alive & well, when the Settlor becomes incapacitated and when the Settlor dies.
  • It basically ensures that the Settlor’s assets are managed and distributed according to his wishes and directives, without court supervision and involvement. This saves the beneficiaries time and money and ensures that the Settlor’s assets and their values are not matters for public record.
  • The basic goal of a Living Trust is to avoid probate. In a Living Trust, assets must be re-registered, retitled or otherwise validly transferred to the Trustee. This is particularly necessary to prevent the probate process on the Settlor’s demise.


Read Also : What is Estate Planning


Testamentary Trust

  • A Testamentary Trust is created as part of a Will and becomes active after the Settlor’s death.
  • With a Testamentary Trust, properties must go through probate before they become subject to the Trust.
  • A Testamentary Trust is often created for a minor or young adult child where assets become distributable upon the death of the parents.
  • Often, people who create Testamentary Trusts do so to protect minor children or children with disabilities who will inherit the proceeds of the Trust.
  • In practical terms, Testamentary Trusts are essentially driven more by the needs of the beneficiaries (particularly infant beneficiaries) than any other considerations.

Will Vs Trust

Read Also: Who Needs Estate Plan And What Are Its Tools



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