What is a Trust?
A trust is a legal agreement that has three parties to it:
Grantor - The person who creates the trust agreement, also commonly referred to as the Trustor or Settlor.
Trustee - The person or entity responsible for managing the property that the Grantor decides to title in the name of the trust.
Beneficiary - The person or entity who is to receive the benefits of the property that is titled in the name of the trust.
Under this type of legal arrangement, the Grantor will transfer ownership of certain assets to the Trustee who will manage the assets for the benefit of the Beneficiary.
What is the difference between Living Trusts and Testamentary Trusts?
If the trust has been created to go into effect during the Grantor's lifetime, then it is referred to as a "living trust."
On the other hand, if the trust has been created to go into effect only after the Grantor dies, then it is referred to as a "testamentary trust." Also, if a trust is created under the terms of a Last Will and Testament, then it is a "testamentary trust."
What is the difference between Revocable Trusts and Irrevocable Trusts?
In a revocable trust, in most cases the Grantor, Trustee, and Beneficiary are the same person. The two most common uses of a Revocable Living Trust are to plan for disability and to avoid probate of the assets that have been funded into the trust prior to the Grantor's death.
An irrevocable trust is often a Special Needs Trust to provide for the care of a disabled person. It may be possible for them to receive trust benefits without being disqualified from receiving government benefits such as Social Security and Medicaid. The trust must contain language making clear that trust distributions are to supplement, not replace, any basic support benefits otherwise available to the disabled person.