A declaration of trust is a document that outlines the particulars and details of the trust. A trust sets up beneficiaries for an individual's money, takes effect when written, and continues to the point of death. Unlike a will, a trust does not have to go through probate. When a will goes through the court system (probate), much of the money is eaten up in legal fees.
To understand what a declaration of trust is, you must first understand what a trust is and what it's used for. When someone sets up a trust, they are transferring all of their assets and property to a person or persons they trust. This includes the person's bank account, their physical property, their stocks and bonds, securities and real estate. The person who created the trust still has access to all of these, but they no longer own any of them.
Creating a Trust
Certain steps must be taken to create a trust. The creator of the trust should first understand the ramifications of their actions. If they are not ready to turn over ownership of their property and assets to another, they should not go into this agreement. In order to go into it responsibly, they will first be briefed on what goes into creating a trust. When the individual (usually called the settlor, trustor or grantor) has decided they do want to go through with the action, they create a declaration of trust -- this document officially creates the trust.
Assets and Beneficiaries
The declaration lists all of the trustor's assets and properties. This lays out what is to be given over to the trustee(s). The beneficiary or beneficiaries are also listed. A beneficiary is anyone who can receive money or assets from the trust. These assets are given over by the trustee(s) based on the information listed in the declaration. The declaration of trust may also confirm how new beneficiaries are decided upon in the future. The trustor and his spouse (if applicable) are the typical beneficiaries. Children are also often named as beneficiaries. Whether a beneficiary is allowed to revoke or amend the trust should also be outlined. The trustor's immediate family members are usually listed, even if they are not named as beneficiaries.
A declaration of trust must name the trustee or trustees. This individual, or group of individuals, are the ones who will take over ownership of the assets and possessions listed in the trust. It can also name how new trustees are to be determined and named in the future. The declaration of trust should also outline what powers the trustee(s) possess. This includes how the trustee is to hand over funds to beneficiaries, how she is to determine new beneficiaries, whether or not she can terminate the declaration of trust, and what powers she has concerning money management and investment.