Why a Trust?
- Trust – a trust is simply a system in which one individual or entity (as trustee) holds the property of another.
A trust functions in having one individual or entity hold the equity (right, claim, or interest) of an asset while another individual or entity holds the legal right to that asset. Creation of a trust may be made for multiple reasons including tax savings, and to leave assets to a minor.
Only emancipated minors can hold property in their own names without a trustee or custodian overseeing such ownership. Because a non-emancipated minor cannot directly receive property, in order to bequeath that minor a part of an estate a trust may be set up for him or her. Two types of trusts may accomplish this purpose: a testamentary and a living trust.
The provision for the creation of a testamentary trust is usually included in a will, but the testamentary trust itself is created upon the testator’s (will creator’s) death. Testamentary trusts are easy ways to leave assets to a minor as needed: for example, as a backup plan in case both parents die at the same time. These trusts are irrevocable and will need to go through probate for creation. It is worth noting that the Uniform Transfer to Minors Act can accomplish many of the same things as a testamentary trust, more cheaply, and with fewer complications.