Trust Relationships

• A trust is typically defined in a written legal document called the trust document. The trust document will name a trustee and one or more beneficiaries. You, the person creating the trust, are called the trustor. Often, the trustor will also be the sole beneficiary or at least one of the beneficiaries. The trustee manages the trust property according to the terms of the trust document. The beneficiaries receive some benefit from the trust property, again as defined in the trust document.
  
  

Trust Terms

• When you create a trust, you have control over every term of the trust. You choose the trustee and all the beneficiaries. You choose what property goes into the trust. You describe what the trustee's duties are and how you want the trust property managed. Finally, you describe how the trustee will distribute the trust property and income to the beneficiaries. You could, for example, tell the trustee to pay you 99 percent of the trust income, and then to pay the other beneficiaries an equal portion of the remaining 1 percent. It's all up to you.
  
  

Revocable, Generally

• When you create the trust you can decide whether the trust will be revocable or irrevocable. A revocable trust means you have the power to terminate the trust at any time, for any reason, and without anyone's permission or consent. An irrevocable trust, on the other hand, can only be terminated with the consent of the trustee and all of the beneficiaries, or by court order. Most trusts will be revocable. Typically, the only irrevocable trusts are those trusts that allow the trustor to take advantage of significant tax savings on income-producing trust property.
  
  

Trust Property, Generally

• You control what property goes into the trust. As a general rule, you don't want to put personal property into the trust that you use frequently, such as personal checking and savings accounts and personal automobiles. But, you probably want to put some property in trust, including real estate, business interests, stocks and bonds, and other valuable property that you will probably hold onto for a long time. When you transfer property to your trust, you no longer personally own the property, but instead the property is owned by the trustee subject to the terms of the trust document.
  
  

Benefits

• Why go through the hassle of creating a revocable trust? The biggest reason is that a trust allows you to avoid probate of all property held in the trust. Probate is the legal process that occurs when you die. A probate court reviews your will and distributes your property according to the will, or if you don't have a will, the court distributes your property according to state law. Probate is sometimes time-consuming and expensive.
  
  Another advantage of the revocable trust is that it allows you to (1) appoint a professional trustee to manage the trust property, and (2) share the benefits of that property with others, such as a spouse, children or other loved ones. A professional trustee can often manage and invest property better than you could on your own, which means there will be more income to share with others.