Forming a Trust 101

End of Life Management Toolkit #7 | by Team Passare and Robert L. Shepard

Glossary of Terms for Forming a Trust
Trust: A trust is a set of written directions established by its creator, called the “settlor”. A valid trust must include trust provisions, a trustee, a beneficiary, and assets transferred to the trust. A trust also consists of specific directions written by its creator instructing the trustee how to hold property for the benefit of a beneficiary.
Settlor: The person who creates the trust, also known as “grantor,” “trustor” or “maker”.
Trustee: Trustee: This is the person who manages the trust. The primary trustee is the initial manager. A successor trustee can be named after the initial manager resigns, or is incapacitated or deceased.
Beneficiary: The entity or individual(s) who will receive benefits from the trust
Corpus: The trust property and/or assets
Irrevocable Trust: A trust whose terms cannot be changed or terminated at the request of the creator during his or her lifetime. Once created, it remains in force based on the terms set forth in the trust agreement. There are several types of irrevocable trusts. Most are created with tax-savings motivations.
Revocable Trust: A trust that can be modified or even completely revoked by the person who created the trust. It is a flexible tool for estate planning because it allows for terms to be changed as needed.
Probate: Court-supervised process by which title to assets are transferred to beneficiaries.
Living Trust: A trust that is created during a person’s lifetime
Testamentary Trust: A trust that is created after death through provisions in a decedent’s last will and testament.
Special Needs Trust: A type of irrevocable trust created by, or on behalf of, a disabled individual in order to provide them with supplemental support, without disqualifying them from receiving government benefits. A Special Needs trust has specific requirements, including payback/reimbursement to the appropriate government agencies. Compare this trust to a third-party, “Supplemental Needs Trust”.
Funded Trust: A trust that has assets titled in the name of the trust, in addition to the minimal $1.00.
Unfunded Trust: A trust with only the minimal asset of $1.00. Unfunded trusts become funded when a decedent dies and the property passes to the trust through the will.
Self-Trusteed Trust: This is a trust where the settlor also serves as the initial trustee. This permits a person to create a trust, fund it with assets, and not give up control of the assets.
Third Party Trusteed Trust: This is a trust that is created with someone other than the settlor. For example, a third party trust can be created with another individual, bank, or corporation. The independent third-party trustee manages the trust for the benefit of the beneficiaries.

From birth to death, life is a series of passages.  Passare provides an online service that connects people to trusted End of Life Management experts and resources.  With Passare, you can explore, plan and prepare for End of Life Management, simplifying the process while honoring ensuring the specific needs and wishes of you and your family.  Passare gives you control over one of life’s most important passages.

The Robert L. Shepard Professional Law Corporation

Robert L. Shepard’s practice is focused on preventative law, basic estate planning, designed to avoid probate; family limited partnerships designed to reduce estate taxes; S Corporation formation to protect assets, and creating irrevocable trusts to protect inheritors against creditors. He has helped over 1,000 clients protect their hard-earned assets and ensures that these assets get passed on to the next generation. Having been before every Federal District Court in California, the U. S. Tax Court, and many of the state’s Superior Courts, he has never had a single: trust set aside, business agreement held unenforceable, or entity disallowed by the Internal Revenue Service, or any court. He also as a deep interest in transferring his breadth of knowledge in the classroom as a law professor.

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