What Is a Trust?

James W. Martin

A trust is a legal arrangement in which an asset is legally owned by one person for the benefit of another person. The legal owner is called the trustee. The beneficial owner is called thebeneficiary. The asset in the trust is called the corpus or principal or res.

A trust is generally created by a written trust agreement entered into by the trustee and a third person who creates the trust for the benefit of the beneficiary. The person who creates the trust is called the grantor or settlor.

If the trust is created during the creator’s lifetime, it is called a living trust or an inter vivos trust. Generally, the assets transferred to a living trust during the settlor’s lifetime are not subject to probate at the settlor’s death. This is why living trusts are used as a means of legally avoiding probate as to the assets in the trust. However, assets in a living trust might be subject to claims under the Florida Probate Code to the extent that the settlor’s probate estate is not sufficient to pay all claims.

Another form of trust is a testamentary trust, which is a trust created by a last will and testament. It is testamentary because it does not take effect until the person who made the will dies and the will is admitted to probate.

A trust can be either revocable or irrevocable. Each type of trust has very different legal and tax consequences.

A trust in Florida can own real property such as land and buildings, and it can also own personal property such as bank accounts, stocks, bonds, mutual funds, vehicles, boats, furniture, etc.

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