A trust is a form of property ownership that generally involves three persons or entities. Those are:
1. The Grantor (also called a Settlor, Creator or Trustor). This is the person who creates the trust, and, frequently, the person who funds the trust.
2. The Trustee. This is the person who receives assets from the Grantor or any other source and who manages and distributes the trust assets in accordance with an agreement, usually in writing, between the Grantor and the Trustee.
3. The Beneficiary. This is the person for whose benefit the trust is created and who receives the assets, or the use, enjoyment, income, or control of the assets of the trust.
Some terminology relating to trusts:
1. The assets of the trust are called the “principal” or “corpus” (Latin for body) of the trust.
2. A “living” or “intervivos” trust is a trust created during the lifetime of the grantor.
3. A “testamentary” trust is a trust created under the the grantor’s will.
4. A “revocable” trust is a trust that can be revoked or changed by the grantor as long as the grantor is alive and competent.
5. An “irrevocable” trust is a trust that the grantor cannot wholly revoke. A trust may be irrevocable yet the grantor retain certain powers or control over it.
6. An “income beneficiary” is a person or entity who or which receives the income (interest, dividends, rents, and royalties) of the trust for a certain period of time or for life.
7. A “remainder beneficiary” is the person or entity who or which receives the assets of the trust after some initial period during which income or some other benefit is paid to one or more other beneficiaries.
An example: Father, in his will, provides that $100,000 is to be held in trust by his brother with income paid to Mother during her lifetime. At Mother’s death, the trust terminates and the trust assets are to be distributed in equal shares to Father’s children. This is a testamentary trust. Mother is the income beneficiary. The children are the remainder beneficiaries.
There are many different types of trusts serving many different management and tax purposes. The following are some of the types of trusts discussed at other places in this website:
Bypass trusts (also known as “credit shelter” or “non-marital” or “B” trusts)
Qualified terminable interest trusts (“QTIPs”)
Qualified personal residence trusts (“QPRTs”)
Grantor retained trusts (“GRATs” and “GRUTs”)
Charitable split interest trusts
Life insurance trusts
Supplemental needs trusts