November 23, 2023
A trust is an arrangement where a person (settlor/grantor/donor) gives another party (trustee), the legal right to manage his/her assets for the benefit of another person (beneficiary) following the terms and conditions outlined in a trust agreement. A trust can be a property, a bond, a mutual fund or even a stock.
What to consider in setting up a Trust:
- Determine Goals: Define the purpose of the trust and identify the assets you want to place in the trust.
- Choose the type of trust you are interested in: There are various types of trusts such as private trust and public trust. Private trust is created for the benefit of specific people while public trust is created for the public/community at large.
- Appoint a trustee: A trustee can be a company or group of individuals an individual or a firm.
- Create a Trust Agreement: In setting up a trust, the settlor/donor must show intention to create the trust which may be expressed or implied by conduct.
- Transfer the assets to the trustee: This is an important aspect, and it depends on whether it is a revocable trust, an irrevocable trust, or a testamentary trust. A revocable trust, also known as a living trust, can be modified or terminated by the settlor during their lifetime. An irrevocable trust cannot be modified or terminated by the settlor once it is created except with the consent of the trustee and the beneficiary. A testamentary trust is created through a will and becomes effective only when the settlor dies.
- Inform beneficiaries of their interests in the trust, their rights, and the provisions made for them.