Much of the world does not recognize or use trusts. Trusts are a British Common Law creation which we adopted from being a British colony. Though Great Briton and we parted company, we kept the British legal system and Trusts.
The area of Trust law is not static. The rules and statutes regarding Trusts are continually changing. Much of the law is state specific, so the code or practice in one state an differs significantly from the rule and regulation in a neighboring state. For example, Pennsylvania and New Jersey have revoked the old British Rule Against Perpetuities, so trusts in those states can last forever. Meanwhile, the rule continues in Ohio.
What is a Trust?
A trust is a legal relationship where one person, the Grantor, gives an asset to another person called the Trustee. The Trustee holds this asset for the benefit of the Beneficiary. Each trust has these three elements; Grantor, Trustee, and Beneficiary.
Initially, Trusts were only Irrevocable. This means that the Grantor set up the trust by setting rules for the Trustee and then granted the Trustee control over the assets under these rules. The Grantor was seen as giving the assets away irrevocably. There was no returning the assets to the Grantor, and the Grantor had no more control over the Trustee.
Revocable Living Trusts.
Trust rules and laws continue to change. The idea of a Revocable Trust is recent. Conceived as a way to avoid probate in states like California, New York and Florida where the process is expensive, a Revocable Trust introduced a trust where the Grantor, Trustee and the Beneficiary were all the same person. Further, the Grantor was given the power to take back the granted assets at any time. Revocable Living Trusts can be excellent estate planning tools in the right situation. To learn more, feel free to read my article Revocable Living Trusts: Everything You Need to Know.
What Other Types of Trusts Exist?
Trusts are flexible tools. Over the years they have been altered and crafted into many different forms to address different needs.
In conclusion, trusts are a flexible estate planning and asset protection tool. Consult with an experienced estate planning attorney about how a trust can best fit into your estate plan.
Thank you to the Pennsylvania Trust Lawyer and New Jersey Trust Lawyer at Klenklaw for sharing this article.