Trust Agreement Definitions

A trust is a fiduciary relationship in which a party known as a trustee grants another party, the agent, the right to own property or assets for the benefit of a third party, the beneficiary. Trusts are created to legally protect the truster`s assets, to ensure that these assets are distributed according to the trust holder`s wishes, and to save time, reduce red tape and, in some cases, avoid or reduce inheritance or inheritance tax. In the field of finance, a trust can also be a kind of closed fund that was created as a limited company. This trust allows a person to transfer tax-free assets to beneficiaries who are at least two generations of their juniors, usually their grandchildren. As a formal agreement, a trust agreement is usually entered into as a contract. In this contract, an agent transfers the ownership rights of one or more assets to an agent. The document generally explains why this transfer takes place, often for the purpose of preserving or protecting assets. Qualified Terminable Interest Property Trust: This trust allows a person to transfer assets at different times to specific beneficiaries, their survivors. In the typical scenario, a spouse receives a lifetime income from the trust and receives children, which remains after the death of his or her spouse. Charitable Trust: This foundation benefits a charitable organization or a non-profit organization. Normally, a not-for-profit foundation is created as part of an estate plan and helps reduce or avoid inheritance and gift taxes.

A non-profit fund, funded during a person`s lifetime, distributes the income to designated beneficiaries (such as children or a spouse) for a fixed term, and then donates the remaining assets to the charity. Trusts can also be used for tax planning. In some cases, the tax consequences of using trusts are less important than those of other alternatives. This is why the use of trusts has become an element of tax planning for individuals and businesses. One of the main advantages of a trust agreement is that it often allows beneficiaries to obtain assets more quickly when compared, for example, to a will. Similarly, some trusts are not considered part of the Trustor`s taxable estate, which is a definite benefit when April 15 takes place. Since trust assets often remain outside the estate, court costs are generally not a problem either. If the courts are not involved, it means that you also have more privacy, because estate procedures are a matter of public registration. Irrevocable trust. Unlike a retractable trust, this type cannot be amended or revised until the end of the agreement. The termination of the trust can only take place with the agreement of the beneficiary. Imagine a trust as a special place where the ordinary assets of your estate are acquired and as a result of a kind of transformation that takes place, which takes on a kind of new identity and is often endowed with super-powers: immunity from inheritance rights, resistance to succession, etc.