By definition, a trust company is a separate corporate entity owned by a bank or other financial institution, law firm, or independent partnership. Its function is to manage trusts, trust funds, and estates for individuals, businesses, and other entities.

A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person or business for the purpose of administration, management, and the eventual transfer of assets to a beneficial party.

Trust. an arrangement that allows a third party to hold and control assets on behalf of a beneficiary. Trustee. the person who maintains the trust property and makes distributions to the beneficiary or beneficiaries according to the terms of the trust. You just studied 32 terms!

Why were trusts created? To reduce the number of competitors in a market from many to one, and so eliminate the problem where competition reduced profits.

Trusts are a way that individuals own property for personal and family purposes just as corporations are a way that individuals own property for business purposes. In fact trusts and corporations overlap to the extent that a non-profit organization can be carried on either as a trust or as a non-profit corporation.

If a trust controlled an entire industry but provided good service at reasonable rates, it was a “good” trust to be left alone. Only the “bad” trusts that jacked up rates and exploited consumers would come under attack.

A corporate trustee such as a bank trust department, a lawyer, or a financial adviser will typically know more about trust management, investments, and taxes than a family member, so a pro can be a good choice if you have a large trust or complex assets in it.

A beneficiary does not have to pay rent to live in a property held in the corpus of a trust (subject to the trust deed), any more than a person must pay rent to live in any property held anywhere (with the owner’s permission). the trustee can allow the trust to make no money. therefore no income. no distributions.

Cons of the Family Trust

• Costs of setting up the trust. A trust agreement is a more complicated document than a basic will.
• Costs of funding the trust. Your living trust is useless if it doesn’t hold any property.
• No income tax advantages.
• A will may still be required.

Assets You Should NOT Put In a Living Trust

• The process of funding your living trust by transferring your assets to the trustee is an important part of what helps your loved ones avoid probate court in the event of your death or incapacity.
• Qualified retirement accounts such as 401(k)s, 403(b)s, IRAs, and annuities, should not be put in a living trust.

A trust can remain open for up to 21 years after the death of anyone living at the time the trust is created, but most trusts end when the trustor dies and the assets are distributed immediately.

Family trusts can be beneficial for protecting vulnerable beneficiaries who may make unwise spending decisions if they controlled assets in their own name. A spendthrift child, or a child with a gambling addiction can have access to income but no access to a large capital sum that could be quickly spent.

Family Trust income A trust does not have to pay income tax on income that is distributed to the beneficiaries, but does have to pay tax on undistributed income.

A trust can be dissolved by entirely distributing the trust property and winding up the trust. This can occur on the trust’s vesting date. This can also occur on an earlier date if you choose to do so. For example, if the purpose of the trust has already been fulfilled.

Here’s a good rule of thumb: If you have a net worth of at least $100,000 and have a substantial amount of assets in real estate, or have very specific instructions on how and when you want your estate to be distributed among your heirs after you die, then a trust could be for you.

There are three main ways for a beneficiary to receive an inheritance from a trust: Outright distributions. Staggered distributions. Discretionary distributions.

Using a revocable living trust instead of a will means assets owned by your trust will bypass probate and flow to your heirs as you’ve outlined in the trust documents. A trust lets investors have control over their assets long after they pass away.

Trusts aren’t public record, so they’re not usually recorded anywhere. Instead, the trust attorney determines who is entitled to receive a copy of the document, even if state law doesn’t require it.