Trust Week, Day One: Intro & Basics

The man who trusts men will make fewer mistakes than he who distrusts them.

- Camillo di Cavour

Put simply, a trust is a contract between two parties that is made for the benefit of a third party. There are three main parties involved in the creation of a trust: the grantor, the trustee, and the beneficiary. The grantor is the person who creates the trust. The trustee is the person whom the grantor appoints to manage the trust. The beneficiary is the person who – wait for it – benefits from the trust. But you didn’t come here to be told something you already know. Let’s talk about how a trust operates.

A grantor creates a trust when he transfers property to the trustee who promises to hold that property for the beneficiary. The property can be cash, personal property, or land. The property is no longer owned by the grantor; it is owned in the name of the trust. When the trustee acts, it is as if the trust took that action. A trust can do almost anything an individual can do, including run a business, hold real estate, and invest cash and hold securities.

The grantor has a great deal of control over what the trustee does. This allows the grantor to create a trust for many purposes. Creating a trust will allow the grantor to provide for a disabled child or elderly parent. A trust can be used to create a scholarship fund or to protect assets from creditors of the grantor or beneficiary. But perhaps the most common reason for the creation of a trust is to avoid the costs associated with probate.

Because a trust is a contract, its terms control the behavior of the trustee regardless of whether the grantor is still living. The trust property is not subject to probate because it is no longer owned by the grantor and is instead owned by the trust. Certain trust provisions can even help save on estate taxes when needed.

As you can probably tell, trusts are too complicated to discuss in just one blog post. There are many different kinds and special rules depending on what the trust’s purpose is. To find out more about trusts, you can contact us by phone at (712) 737-3885 or by e-mail.

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Lawyer Joke of the Day:

A golfer hooked his tee shot over a hill and onto the next fairway. Walking toward his ball, he saw a man lying on the ground, groaning with pain.

"I'm an attorney," the wincing man said, "and this is going to cost you $5000."

"I'm sorry, I'm really sorry," the concerned golfer replied. "But I did yell 'fore'."

"I'll take it," the attorney said.