How Does a Trust Work?

Definition of a Trust

A trust is property set aside by the owner and held by a trustee (the person overseeing the account) to be given to another individual at a certain date in time. A trust can include money, physical property such as real estate, cars, jewelry, valuable paintings, and antiques. Trusts can be set up and maintained for years or for a short period of time. The person who is creating the trust can decide if the trust should be released at a certain date (a child's 21st birthday) or upon their death.

Setting up a Trust

Find someone who can act as your trustee. Ideally this would be an attorney. Instruct them on what you own and who you want to have it. Also instruct the attorney as to when each item is to be dispersed. If you set aside $10,000 for your Grandson and you want him to have it when he turns 21, then tell the attorney that. Leave the paperwork to the attorneys, but make sure you review it before you sign it to make sure it spells out your wishes the way you conveyed them. Make sure that the banks that are to distribute the money you have set aside get a copy of the trust.

Changing the Trust

Trusts are also called living trusts because you have the power to change them or update them while you are alive. You may acquire a new painting that you want to leave your daughter so you add it to your trust. You may have a grandson that choose a life of drugs and you no longer want to leave him the $10,000 because you know what he would use it for. You can change the beneficiary, change the amount, and add new items. The trustee can do this with ease. Make sure you provide updated copies to your bank.

How are Living Trusts Dispersed?

Living trusts are dispersed without any need to go to court. They do not need to be probated. The trustee can just withdraw the $10,000 on your grandson's 21st birthday and give it to him. Upon your death the trustee can give out your designated property. In any case, the trustee (attorney) is the only one who can disperse the property listed in a trust.