A trust is a legal document that entrusts real, tangible, and/or intangible property to a trustee. An individual creates a trust for their beneficiaries regarding the distribution of their assets after their death. A trust will normally contain very detailed and specific instructions regarding the trustee’s duties of managing and distributing the assets on behalf of the heir. These duties usually include preparing court accountings, paying bills, maintain escrow accounts, holding property pending an exchange sale, settling claims for taxes and debt, managing investments, and keeping records. Additionally, depending on the type of trust, a trustee’s responsibilities may also include managing distributions of income, principal, inheritances, medical expenses, and donations.
When an individual creates a will and specifies an individual or business as an executor or personal representative of the state, a trust relationship is formed as well. The specified individual becomes the trustee. A trustee can be a lawyer, bank, individual or business, and manages the property for the benefit of the heir(s). Usually, trusts go hand-in-hand with estate planning and can help to minimize or eliminate estate taxes, avoid probate, create an annuity income through donations, and much more.