What is a Trust?Q:
What is a Trust?A:
A trust is created when someone (the "trustee") holds property for the benefit of another. For example, I could transfer stock to another person with instructions to hold the stock as I direct and pay it to the person or persons I direct under the conditions I set forth. There are many different types of trusts. The ones most relevant to planned giving are living (or "intervivos" trusts) and testamentary trusts. Trusts can be revocable or irrevocable (meaning that you can revoke the trust, or not).
Living trusts are trusts that take effect during your lifetime. For example, you could create a trust, name yourself or another as trustee, and direct how the property is to be distributed both during your lifetime and then on your death. If the trust is revocable, you can change the terms at any time and even revoke it during your lifetime. If the trust is irrevocable, you are generally not allowed to change it or revoke it. You can be the trustee of your own trust and name a successor to serve if you resign, become incapacitated or die. Your trust can be for your benefit during your lifetime and then provide for the beneficiaries on your death.
Testamentary trusts are trusts that take effect on death. A trust established by a will is a testamentary trust. For example, your will could provide that certain amounts are to be paid to your child, but as long as your child is under the age of 25, the assets are paid to a third person as trustee to be invested and paid out for the benefit of your child, as you direct in your will.
Charitable trusts can be either living trusts or testamentary trusts. In order to receive a charitable deduction, the trust must be irrevocable, and if an individual is also a beneficiary, the trust must meet certain requirements.
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