Understanding Trusts

In common law legal systems, a trust is an arrangement whereby property (including real, tangible and intangible) is managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a settlor , who entrusts some or all of their property to people of their choice (the trustees ). The trustees hold legal title to the trust property (or trust corpus), but they are obliged to hold the property for the benefit of one or more individuals or organizations (the beneficiary), usually specified by the settlor, who hold equitable title.
The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.
The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law.

Trustees

The trustee can be either a person or a legal entity such as a company.  A trust may have one or multiple trustees. A trustee has many rights and responsibilities; these vary from trust to trust depending on the type of the trust. A trust generally will not fail solely for want of a trustee. A court may appoint a trustee.  Trustees are usually appointed in the document (instrument) which creates the trust.

Beneficiaries

The beneficiaries are beneficial owners of the trust property. Either immediately or eventually, the beneficiaries will receive income from the trust property, or they will receive the property itself. The extent of a beneficiary's interest depends on the wording of the trust document. One beneficiary may be entitled to income (for example, interest from a bank account), whereas another may be entitled to the entirety of the trust property when he attains the age of twenty-five years. The settlor has much discretion when creating the trust, subject to some limitations imposed by law.

The Common purposes for trusts include:

Privacy,  Spendthrift Protection, Wills and Estate Planning, Charities, Unit Trusts, Pension Plans, Remuneration Trusts, Corporate Structures, Asset Protection, Tax Planning, Tax Evasion. 

 Different types of trusts:

Constructive Trust, Express Trust, Fixed trust, Hybrid trust, Implied trust, Incentive Trust, Living Trust, Irrevocable Trust, Offshore Trust, Private and Public Trust, Protective trust, Revocable Trust, Special Trust, Spendtrift Trust, Standby Trust, Will Trust and Unit Trust.

 The advantages of trusts:

• Cost savings. Avoiding probate can save substantial fees and costs.
• Incapacity management. Named trustees can manage assets for a settlor’s benefit if he or she is incapacitated, avoiding the need for a court-appointed conservator.
• Tax savings. A trust arrangement can reduce estate taxes for a married couple in certain situations. Ask your attorney for more information.
• Beneficiary protection . Setting up a continuing trust arrangement in either a will or living will can protect beneficiaries who are too young or otherwise unsuitable to receive all of their inheritance outright in a lump sum, and can help protect against loss of assets or use on antisocial purposes such as drug addiction.
• Privacy. One of the often overlooked advantages of a living trust is that it offers some privacy advantages. Essentially, a living trust is a tool that can be used to make it more difficult for disgruntled heirs and creditors of you or your beneficiaries to challenge the distribution of your assets.
• Flexibility -- One of the most important advantages of a living trust is that it is far more flexible than a normal testamentary trust. The reason is that a testamentary trust is created by a will. It is normally part of the will. So, if you want to change it, you have to re-write the will as well. And any time you execute a new will, you have to go through all the formalities required to make a will valid. A living trust, in contrast, is a separate document you are can amend at any time. There are very few formalities required to amend your living trust.