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Trusts

A trust is a legal arrangement under which one person or institution controls property given by another person for the benefit of a third-party. A trust is created by a person called a settlor.  This person transfers property to a trustee who holds the trust property for the benefit of the beneficiaries of the trust. The trustee has legal title to the trust property, but the beneficiaries have what's called equitable title to the trust property.

The trustee owes a fiduciary duty to the beneficiaries, who are the beneficial owners of the trust. A trustee may be either a natural person, or an entity, or combination of the two. The settlor himself may be a beneficiary of the trust.

Personal trust law was developed in about the time the Crusades, during the 12th and 13th centuries. When a landowner left England to fight in the Crusades they needed someone to run the estate in their absence.

Trusts are of two primary types: living trusts and testamentary trusts. Living trusts are set up while the settler is alive, and testamentary trusts are established by will upon the death of the trustor. Living trusts can be either revocable or irrevocable.

A living trust enables you to control the distribution of your estate. It takes effect as soon as it is established and funded. A living trust can manage your estate to help reduce taxes. Assets in the trust do not become part of the probate estate, and the distribution is not part of the public record. Privacy is often a desired feature of a living trust. Persons with property in more than one state should consider establishing a living revocable trust to own the property in order to avoid multiple probates in different states.

Testamentary trusts are often established to help control the distribution of assets and the possible reduction of fees in estate taxes. However, they do not avoid probate.