Formally speaking, a trust is simply a contractual arrangement between two parties – the Grantor and the Trustee – which specifies the rights, responsibilities and obligations with respect to assets that the Grantor has transferred to the trust.
Trusts can be revocable or irrevocable.
A Trust can accomplish a variety of objectives:
- Avoid probate on assets transferred to the trust prior to death of the Grantor.
- Hold assets for minor, disabled, or financially irresponsible beneficiaries.
- Create flexibility in estate planning for couples in a second marriage.
- Provide asset protection and divorce protection for beneficiaries of the deceased.
- Trusts can also be used to minimize federal estate taxes in certain instances.