Simple Trust Agreement
A simple trust agreement is a key component of most estate plans. The trust agreement works hand in hand with a will, a power of attorney and an advanced health-care directive. Basically, the simple trust agreement provides a way to own property while avoiding the probate process under your will when you die.
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Types
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Trust agreements can be either revocable or irrevocable. A revocable trust is a trust that the creator can terminate at any time. An irrevocable trust, on the other hand, is a trust that the creator can terminate only if she has permission from the trustee and beneficiaries. An irrevocable trust is created to minimize taxes and protect assets.
Purpose
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The purpose of a simple trust agreement is to avoid probate of any property owned by the trust. When you die, your estate executor will gather all of your property, which collectively embodies your probate estate. A probate court will then review your will and order distribution of your property under the will. When you create a trust, however, any property owned by the trust does not have to pass through probate. The property owned by the trust simply passes according to the terms of the trust.
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Trustee
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When you create a simple trust agreement, you need to identify a trustee. The trustee is the person or business that will manage the trust property. Technically, you will transfer legal title of any trust property to the trustee. The trustee owns the property according to the terms of the trust. The trust agreement is like an instruction manual for the trustee. The trustee must comply with the terms of the trust, and since you create the terms of the trust, you have control over the trustee.
Beneficiaries
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A simple trust agreement also must identify one or more beneficiaries. A beneficiary is any person, business or charity that is eligible for a distribution from the trust. You can, for example, name yourself as the sole beneficiary and then name your spouse or all of your children as contingent beneficiaries after you die.
Property
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The final requirement for a simple trust agreement is to transfer property to the trustee, who holds title subject to the terms of the trust agreement. The trust agreement should identify all of the trust property. Additionally, you will need to transfer title by creating a paper trail. For example, if you want to transfer your home to the trust, you need to draft a deed to the trustee. Document all title transfers to the trustee. That way, if there is ever a dispute over what property is or is not in the trust, you can prove what you intended.
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References
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